U.S. Service-Sector Activity Accelerates in January -- 2nd Update

02/05/18 11:55 AM EST
By Sarah Chaney 

A measure of service-sector activity across the U.S. picked up in January to reach a 10-year high, suggesting strong momentum in the sector powering the bulk of the U.S. economy beginning 2018.

The Institute for Supply Management Monday said its index of nonmanufacturing activity -- tracking industries including health care, finance, agriculture and construction -- rose to 59.9 in January from 56 in December, the best index reading for records dating back to 2008.

This figure exceeded expectations of economists surveyed by The Wall Street Journal, who had forecast a January reading of 56.5. A number above 50 indicates expansion.

The rise was driven by increases across a broad swath of components, including new orders and employment indexes. The new orders index rose to 62.7 in January from 54.5 in December. The employment index increased in January to 61.6, the highest level on record.

Anthony Nieves, chair of the ISM committee that oversees the survey, said he sees this strength in services continuing.

"The economy has come out really strong for the month of January," Mr. Nieves said. "Our respondents are telling us it's due to the confidence level they have within their companies."

The rise in the new orders metric was propelled by a range of factors, including business confidence that tax reform will boost investment, Mr. Nieves said.

January's acceleration comes after two consecutive months of pullback in the services sector.

"The ISM indices have been especially volatile in recent months, but January's release is a reassuring sign that the economy has continued to gather momentum at the beginning of 2018," said Michael Pearce, economist at Capital Economics, in a note to clients. "We expect GDP growth of 2.5% for 2018 as a whole, faster than the 2.3% growth seen in 2017."

Other data have recently pointed to broadening economic strength. Gross domestic product, a broad measure of goods and services produced across the U.S., rose at an annual rate of 2.6% from October through December, the Commerce Department said. The measure was bolstered by strong business and consumer spending.

A separate ISM gauge that tracks activity in the much-smaller manufacturing sector maintained momentum in January.

Write to Sarah Chaney at sarah.chaney@wsj.com

 

(END) Dow Jones Newswires

February 05, 2018 11:55 ET (16:55 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.