In the Institute Supply Management ongoing survey of purchasing and supply executives, January came in as the seventh straight month of economic expansion in the services sector.
In the ISM Report On Business. Steve Miller, chair of the ISM Services Business Survey Committee, stated, “The Business Activity Index registered 54.5% in January, 3.5 percentage points lower than the seasonally adjusted 58% recorded in December. After seasonal adjustments, this is the 56th consecutive month of expansion for the index. The New Orders Index recorded a reading of 51.3% in January, 3.1 percentage points lower than the seasonally adjusted December figure of 54.4%. The Employment Index remained in expansion territory for the fourth consecutive month: The reading of 52.3% is a 1-percentage point increase compared to the seasonally adjusted 51.3% recorded in December.”
He added that the Supplier Deliveries index came in at 53%, a half percentage point higher than the 52.5% recorded in December. January was the second consecutive month the index was in expansion territory, indicating slower supplier delivery performance. Supplier Deliveries is the only inversed ISM Report On Business index. So, a reading of above 50% indicates slower deliveries, which is typical as the economy improves and customer demand increases.
“The Prices Index registered 60.4% in January,” Miller noted, “a four-percentage point decrease from December’s seasonally adjusted reading of 64.4%. The index has registered two consecutive readings above 60% after being below 60% since February 2024. The Inventories Index was in contraction territory in January for the third month in a row, registering 47.5%, a decrease of 1.9 percentage points from December’s figure of 49.4%. The Inventory Sentiment Index expanded for the 21st consecutive month, registering 53.5%, up 0.1 percentage point from December’s reading of 53.4%. The Backlog of Orders Index remained in contraction territory for a sixth consecutive month, registering 44.8% in January, a 0.5-percentage point increase from the December reading of 44.3%.”
In January, 14 services industries reported growth, five more than the previous month’s total.
Miller pointed out, “January was the second month in a row with all four subindexes that directly factor into the Services PMI — Business Activity, New Orders, Employment and Supplier Deliveries — in expansion territory. Slower growth in the Business Activity and New Orders indexes led to the lower composite index reading. Poor weather conditions were highlighted by many respondents as impacting business levels and production. Like last month, many panelists also mentioned preparations or concerns related to potential U.S. government tariff actions. However, there was little mention of current business impacts as a result.”
The 14 services industries reporting January growth were Agriculture, Forestry, Fishing & Hunting; Accommodation & Food Services; Mining; Wholesale Trade; Finance & Insurance; Health Care & Social Assistance; Educational Services; Transportation & Warehousing; Retail Trade; Information; Construction; Management of Companies & Support Services; Public Administration, and Utilities. The three industries reporting January contraction were Other Services; Real Estate, Rental & Leasing, and Professional, Scientific & Technical Services.
For its part, the economic activity in the manufacturing sector expanded in January after 26 consecutive months of contraction. The Manufacturing PMI registered 50.9% in January, 1.7 percentage points above the seasonally adjusted 49.2% recorded in December. As such, the overall economy continued in expansion for the 57th month after one month of contraction in April 2020, as a Manufacturing PMI above 42.3% over a period of time is indicative of an overall economic expansion.
The eight manufacturing industries reporting growth in January were: Textile Mills; Primary Metals; Petroleum & Coal Products; Chemical Products; Machinery; Transportation Equipment; Plastics & Rubber Products; and Electrical Equipment, Appliances & Components. The eight industries reporting contraction in January were: Nonmetallic Mineral Products; Miscellaneous Manufacturing; Wood Products; Fabricated Metal Products; Furniture & Related Products; Computer & Electronic Products; Paper Products, and Food, Beverage & Tobacco Products.
