U.S. ISM Services PMI Declines in January; Prices Moderate
by:Tom Moeller
|in:Economy in Brief
Summary
- Total index remains below October high.
- Business Activity index falls to five-month low; new orders weaken but employment firms.
- Prices Index moves lower, reversing sharp December gain.
The U.S. ISM Services PMI fell to 52.8 in January following an increase to 54.0 in December, according to today’s report by the Institute for Supply Management. The reading indicated service sector expansion for the seventh consecutive month. The Action Economics Forecast Survey expected 54.2 for January.
Haver Analytics constructs a composite index combining the services index and the manufacturing index released on Monday. This index declined to 52.6 in January from 53.4 in December. The latest figure remains above its June low of 49.1.
Amongst the services component series, the business activity index fell to 54.5 in January after rising to 58.0 in December. The index remains higher than its recent low of 50.2 in June. A lessened 19.6% (NSA) of respondents reported higher orders last month while an increased 18.3% reported an activity decline. The new orders index declined to 51.3 in January after rising to 54.4 in December, indicating expansion in new orders for the seventh straight month. An increased 19.5% of respondents (NSA) reported higher orders in January and an increased 23.2% reported a decline.
Improvement was recorded on the labor front. The employment index rose to 52.3 in January after moving up to 51.3 in December. The latest reading stands well above its low of 43.7 in December 2023. A lessened 13.6% of respondents (NSA) indicated higher employment in January while 14.1% reported a decline. The supplier deliveries index (NSA) rose to 53.0 in January from 52.5 in December, indicating slower supplier delivery speeds.
On the inflation front, the prices index fell to 60.4 in January after jumping to 64.4 in December, which was the highest level in nearly two years. An increased 25.0% of respondents reported higher prices while a fairly steady 3.1% reported lower.
Additionally, the new export orders index increased to 52.0 in January (NSA) following a rise to 50.1 in December. The imports index eased to 49.8 in January from 50.7 in December. The inventory change index fell to 47.5 in January after rising to 49.4 in December. These series are not seasonally adjusted and not included in the ISM Services PMI total.
The ISM Services PMI is a composite index consisting of four equally weighted diffusion indexes: Business Activity, New Orders, Employment, and Supplier Deliveries. A reading above 50 indicates expansion in the services sector, while below 50 suggests contraction. Supplier Deliveries is the only ISM index that is inversed; a reading above 50 indicates slower deliveries. The ISM figures are available in Haver's USECON database, with additional detail in the SURVEYS database. The expectations figure from Action Economics is in the AS1REPNA database.
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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