U.S. ISM Services PMI Rebounds in January

The U.S. ISM Services PMI jumped to 53.4 during January from 50.5 in December and 52.5 in November, according to today’s report by the Institute for Supply Management. The figure indicated expansion for the 13th consecutive month. The latest increase followed m/m declines in three of the four prior months. A reading of 52.1 had been expected in the Action Economics Forecast Survey for January. A reading above 50 indicates expansion and the figures were slightly revised.

Haver Analytics constructs a composite index combining the services index and the manufacturing reading. This index rose to 52.9 in January after falling to 50.1 in December, also showing expansion for the thirteenth straight month. The index remained below the record 66.3 in November 2021. The series date back to July 1997.

In the latest services survey, the employment index surged to 50.5 after declining sharply to 43.8 in December which was a roughly three-year low. A higher 16.2% of respondents reported more hiring while a steady 20.5% reported it lower. The supplier delivery series strengthened to 52.4 from 49.5. It as the first reading above the breakeven level of 50 in four months and the highest level since November 2022. Seven percent of respondents reported faster delivery speeds while 11.3% percent reported slower speeds. The new orders reading rose modestly to 55.0 from 52.8. The index has been above 50 since December 2022. Twenty-two percent (NSA) of respondents reported more orders while 20.8% reported a decline.

The business activity index held steady at 55.8. Twenty-one percent of respondents report stronger activity while 19.8% reported it weaker.

The prices index (which is not part of the aggregate series) surged to 64.0 from 56.7. It was the highest level since February of last year, up from a June low of 54.8. Thirty-six percent of respondents reported higher prices while 9.1% reported them lower.

In other series, not contained in the overall index, the export orders index rose to 56.1 (NSA) from 50.4. It was the highest level in four months. The imports series strengthened to 59.9 from 49.3. The order backlog series rose to a six-month high.

The ISM Services PMI is a composite index consisting four equally weighted diffusion indexes (25% each): Business Activity, New Orders, Employment, and Supplier Deliveries. A reading above 50 indicates expansion in the services sector; 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.