Nonmanufacturing sectors contracted at a slower pace in December, according to a Tuesday report from the Institute for Supply Management, but surveyed managers said they were still worried about a falloff in their business, budget cuts and jobs. The ISM nonmanufacturing index rose to 40.6% in December from a record low of 37.3% in November. Economists polled by MarketWatch were looking for a December result of 37%. Readings below 50% indicate that more firms are contracting than expanding. In December, only one industry reported growth: retail trade. Among the 17 industries reporting contractions were wholesale trade; professional, scientific and technical services; and transportation and warehousing. Credit Suisse analysts had been looking for a poor December result. "Weakness was broad-based across industries last month, and this should persist," Credit Suisse analysts wrote in a research note before the data's release. "In particular, anecdotal reports from retailers with respect to holiday shopping have been abysmal." Details The business activity index rose to 39.6% from 33%. New orders increased to 39.9% from 35.4%, and the employment index rose to 34.7% from 31.3%. The prices index fell to 36% -- the lowest level since the data was first reported in 1997 -- from 36.6%, indicating a decrease in prices. The institute said respondents' comments reflected concern about the overall decline in business, lack of funding, budget cuts and lower employment. The ISM data arrives before a Friday report from the Labor Department on nonfarm payrolls for December. Economists polled by MarketWatch are expecting a drop of 500,000 jobs, which would mean that more than 2 million jobs were lost in 2008. In November, 533,000 nonfarm payroll jobs were lost, the most for a single month since 1974. Elsewhere Tuesday, the government reported that shipments from U.S. factories plunged a record 5.3% in November, pushed lower by weak demand and falling prices.

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