US private sector output continued to increase at a solid pace in December, but a slowdown in the service economy contributed to the weakest overall growth for just over one-and-a-half years, according to the IHS Markit Flash US Purchasing Managers Index.

The rate of manufacturing job creation was the softest since August 2017. More cautious staff hiring policies were partly due to a drop in business optimism to its lowest for 26 months, which a number of firms attributed to concerns about the outlook for the global economy. Some firms also commented on pressure on operating margins following a sustained period of rising raw material costs.

“The flash PMIs bring signs of the US economy ending 2018 on a softer note,” said Chris Williamson, chief business economist at IHS Markit. With business activity expanding at the slowest rate for one and a half years, the surveys indicate that the pace of economic growth has faded to 2.0% in December, albeit closer to 2.5% for the fourth quarter as a whole.

“Importantly, although growth remains relatively robust, momentum is being lost and is likely to continue to fade as we move into 2019,” Williamson said. “New order inflows hit the lowest since April of last year and expectations regarding future business growth have slipped to the lowest for two-and-a-half years.”

Findings released by IHS Markit included:

• Flash US Composite Output Index fell to a 19-month low of 53.6 in December, down from 54.7 in November
• Flash US Services Business Activity Index fell to an 11-month low of 53.4 in December from 54.7 in November.
• Flash US Manufacturing PMI fell to a 13-month low of 53.9 from 55.3 in November.
• Flash US Manufacturing Output Index was unchanged month over month in December at 54.3.