U.S. Services Activity Expands More Than Expected — ISM

By Ed Frankl

The U.S. services sector accelerated faster than expected in January, as employment trends improved and demand rebounded, according to survey data released Monday.

The Institute for Supply Management's services-activity index rose to 53.4 in January from 50.5 in December. Economists had expected the index to increase less steeply to 52.0, according to a poll compiled by The Wall Street Journal ahead of the release.

A reading above the no-change mark of 50 indicates expansion in the services sector, which has grown for the last 13 months, and 43 of the past 44, the ISM said.

ISM's employment index jumped into expansionary territory, at 50.5 from 43.8 in December, while the new orders index ticked up to 55.0 in January from 52.8. The survey's measure of business activity held on month at 55.8.

"The majority of respondents indicate that business is steady," said Anthony Nieves, chair of the ISM Services Business Survey Committee.

"They are optimistic about the economy due to the potential impact of interest rate cuts; however, they are cautious due to inflation, associated cost pressures and ongoing geopolitical conflicts," he added.

The index of prices rose 7.3 points to 64.0, a reflection of underlying inflationary pressures that could concern policymakers at the Federal Reserve.

Ten of 17 sub-industries ISM measures reported growth in January, led by healthcare and agriculture, ISM said.

"Economy signals are mixed. Some sectors are booming and some--like solar and wind power, ship building and electric vehicles--are slowing down," said one respondent to the survey from the retail-trade sector.

"But overall, the economy is in good shape and there is no imminent threat of a recession," the respondent added.

Write to Ed Frankl at edward.frankl@wsj.com

(END) Dow Jones Newswires

February 05, 2024 10:44 ET (15:44 GMT)

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