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US Service Sector Expands Beyond Expectations In January, Signals Robust Economic Resilience

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The U.S. services sector expanded more than anticipated in January, underscoring the sector’s robust performance even amidst elevated borrowing costs and rising geopolitical tensions.

The Institute for Supply Management (ISM) said Monday that its Services Purchasing Managers’ Index (PMI) leaped from 50.6 in December to 53.4 in January , surpassing economist predictions of 52. This marks the highest level since September 2023 and continues a 13-month streak of expansion, highlighting the sector’s enduring strength.

Last week, the ISM Manufacturing PMI for January also exceeded expectations, signaling robust economic resilience.

Key Highlights From ISM Services PMI Report

The January ISM Services PMI of 53.4 indicates a faster expansion pace, the most significant since September 2023.
Growth was driven by increased rates in New Orders, Employment and Supplier Deliveries indexes.
Health Care & Social Assistance led the industry growth, followed by Agriculture, Forestry, Fishing & Hunting and Professional, Scientific & Technical Services.

“The jump in January’s growth rate is due to the accelerated growth of the New Orders, Employment, and Supplier Deliveries indexes. The business community remains optimistic, buoyed by the potential for interest rate cuts, though cautious due to inflation and ongoing geopolitical tensions,” said Anthony Nieves, chair of the ISM Services Business Survey Committee.

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Deeper Dive Into The Data

Index Series Index Jan Series Index Dec Percent Point Change Direction Rate of Change Trend (months)
Services PMI 53.4 50.5 +2.9 Growing Faster 13
Business Activity/ Production 55.8 55.8 0.0 Growing Same 44
New Orders 55.0 52.8 +2.2 Growing Faster 13
Employment 50.5 43.8 +6.7 Growing From Contracting 1
Supplier Deliveries 52.4 49.5 +2.9 Slowing From Faster 1
Inventories 49.1 49.6 -0.5 Contracting Faster 2
Prices 64.0 56.7 +7.3 Increasing Faster 80
Backlog of Orders 51.4 49.4 +2.0 Growing From Contracting 1
New Export Orders 56.1 50.4 +5.7 Growing Faster 3
Imports 59.9 49.3 +10.6 Growing From Contracting 1
Inventory Sentiment 59.3 55.3 +4.0 Too High Faster 9

Business Activity/Production remained stable at 55.8,…

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