(Feb 4): US service providers registered the strongest back-to-back growth since 2024 last month as business activity picked up.
The Institute for Supply Management’s (ISM) index of services was unchanged at 53.8 in January, matching the highest since October 2024, according to data released on Wednesday. Readings above 50 indicate expansion in the largest part of the economy.
The composition of the report painted a more nuanced picture. While a pickup in business activity underpinned the overall measure, orders growth cooled and employment barely expanded.
The ISM measure of business activity, which parallels the ISM’s factory output gauge, climbed more than two points to 57.4 — the highest since October 2024.
Eleven industries reported growth last month, led by health care, utilities, construction and retail trade. Five, including transportation and warehousing, contracted.
The new orders index, meanwhile, slipped to 53.1 from a one-year high. What’s more, the report indicated a slump in demand from overseas customers, with export bookings contracting at the fastest rate since March 2023.
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The report showed an index of prices paid for services and materials climbed to a three-month high of 66.6. Changes in trade policy by the Trump administration are also prompting some companies to adjust their supply chains.
The ISM’s supplier deliveries index rose to the highest since October 2024, indicating longer lead times.
Select ISM industry comments
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“The uncertainty of US tariff policies continues to affect our purchasing. The proliferation of AI is affecting how we purchase services, particularly getting more value out of service contracts and taking a harder look at risk.” — Accommodation & Food Services
“Pending surge in new capital investments of our customers, specifically in data centers, combined cycle power, and nuclear market sectors. Expect significant business growth in 2026, both in the domestic US and globally.” — Construction
“Our business has stayed pretty consistent over the past few months.” — Finance & Insurance
“Still slow but more optimistic.” — Management of Companies & Support Services
“Supply chain is steady. Prices are leveling off.” — Public Administration
“Solid holiday performance across most units. January is even better. Consumers are still buying discretionary goods.” — Retail Trade
“Typical slow start. A lot of busy activity quoting, reports and the like.” — Transportation & Warehousing
Meanwhile, a gauge of inventories at service providers slumped more than nine points to 45.1, marking the biggest contraction in stockpiles since mid-2024. The latest figure suggests consumer-facing service providers were left with less inventory following a solid holiday-shopping season.
Uploaded by Felyx Teoh
