The service sector, which contributes about 90% of the U.S. economy, unexpectedly rebounded to a nearly two-year high in January this year as restrictions eased in major cities such as New York, and new orders drove employment indicators back into expansion, setting a good tone for Friday’s nonfarm payrolls release.
The U.S. Institute for Supply Management (ISM) announced on Wednesday, Feb. 3, that the U.S. ISM services index (previously known as the non-manufacturing index) unexpectedly rose to 58.7 in January, the highest since February 2019 and in expansionary territory for eight consecutive months. the previous value in December was also revised upward from 57.2 to 57.7, and the market had expected a decline to 56.7 in January from a year earlier, after the previous value of 55.9 in November had hit a In November, the previous value of 55.9 had hit a six-month low.
Among the core sub-indexes.
January’s new orders index rose 3.2 points to 61.8, the eighth consecutive month of expansion and a six-month high since July 2020, the previous value in December from 58.5 slightly revised up to 58.6, industry representatives interviewed said the industry has rebounded.
The business activity index (similar to the ISM manufacturing industrial output index) slipped 0.6 points to 59.9, expanding for the eighth consecutive month, with the previous value revised upward from 59.4 to 60.5 in December, with industry representatives saying people are adjusting to the current environment and business activity and prospects are improving.
Notably, the employment index rose sharply by 6.5 points to 55.2, re-entering expansionary territory and hitting an 11-month high. both the December prior and the March-August 2020 values fell into contraction, with December clearly hit by the winter Epidemic backlash.
The price paid index edged down 0.2 points to 64.2, and the December prior was revised down to 64.4 from 64.8, but the reading above 60 also underscores higher inflationary pressures.
In addition.
The Supplier Delivery Index dipped 5 points to 57.8, a reading above 501 still represents a slower pace of delivery and is generally seen as a positive sign of an improving economy and increased demand on the consumer side.
The inventory index fell sharply by 9 points to 49.2, returning to contraction territory, after a previous reading of 58.2 had been the highest since June 2020, highlighting tight inventories. The backlog of orders index also returned to expansion.
Although new export orders fell sharply by 10.3 points to 47, falling in contraction range, stopping the expansion for five consecutive months, but import orders rose slightly, from 47.7 to 49.7, close to the 50 Rong Gu line, analysis said this is a sign that companies try to replenish inventories.
Another data released on Wednesday showed that the U.S. Markit services PMI (purchasing managers index) final value rose to 58.3 in January, the sixth consecutive month of expansion. The final employment sub-index fell to 51.1, the lowest since July last year, but the seventh consecutive month of expansion; the final input price sub-index hit a record high. This brought the final Markit Composite PMI to 58.7 in January, a record high since March 2015.
Chris Williamson, chief business economist at IHS Markit, said the improving manufacturing and services data provided the conditions for an upswing in the U.S. economy in the first quarter of the year, with companies growing optimistic amid hopes of a vaccine rollout and further fiscal stimulus.
However, the cost burden on companies rose sharply to the highest since records began in October 2009 due to lower supplier performance and higher input prices, which led to a significant increase in private sector output costs earlier this year, i.e., inflationary pressures came to the fore.
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