Services sector expands again in January
Economic activity in the services sector continued to expand in January, say the nation’s purchasing and supply executives in the latest ISM Services PMI Report.
The Services PMI registered 53.8% to start 2026 as it finished 2025, on a positive note, with its 19th month in a row in expansion territory after ISM’s most recent seasonal adjustments.
The report was issued Feb. 4 by Steve Miller, CPSM, CSCP, chair of the Institute for Supply Management (ISM) Services Business Survey Committee: “In January, the Services PMI registered a reading of 53.8%, the same as the seasonally adjusted December figure of 53.8% and a 19th consecutive month of expansion. The Business Activity Index continued in expansion territory in January, registering 57.4%, 2.2 percentage points higher than the seasonally adjusted reading of 55.2% recorded in December. The New Orders Index also remained in expansion in January, with a reading of 53.1%, 3.4 percentage points below December’s seasonally adjusted figure of 56.5%. The Employment Index expanded for the second month in a row with a reading of 50.3%, a 1.4-percentage point drop from the seasonally adjusted 51.7% recorded in December.
“The Supplier Deliveries Index registered 54.2%, 2.4 percentage points higher than the 51.8% recorded in December. This is the 14th consecutive month that the index has been in expansion territory, indicating slower supplier delivery performance. (Supplier Deliveries is the only ISM PMI Reports index that is inversed; a reading of above 50% indicates slower deliveries, which is typical as the economy improves and customer demand increases.)
“The Prices Index registered 66.6% in January, higher than the previous two months and 0.2 percentage point above its 12-month average. The January figure was a 1.5-percentage point increase from December’s seasonally adjusted reading of 65.1%. The index has exceeded 60% for 14 straight months.
“The Inventories Index registered 45.1% in January, a decrease of 9.1 percentage points from December’s figure of 54.2% and in contraction territory for the third time in five months. The Inventory Sentiment Index expanded for the 33rd consecutive month, registering 54.3%, up 0.2 percentage point from December’s figure of 54.1%. The Backlog of Orders Index was in contraction territory for the 11th month in a row, registering 44% in January, a 1.4-percentage point increase from the December figure of 42.6 percent.
“Eleven industries reported growth in January, the same as in December, and the number reporting contraction remained at five. The January Services PMI reading of 53.8%, while flat compared to December, is 2 percentage points above the seasonally adjusted 12-month average of 51.8%. This average is an uptick of 0.1 percentage point over December’s 12-month average of 51.7% and its first month-over-month increase since April 2025.”
Miller continued: “January’s Services PMI is the result of a second month in a row of all four subindexes being in expansion territory. December 2024 and January 2025 featured similar subindex performance, but in the last two months, the PMI is stronger year over year by an average of 0.7 percentage point. The Employment Index expanded for a second straight month for the first time since January and February 2025. These are positive signs for continued expansion; however, the closely watched Prices Index continues to creep up, now 0.2 percentage point above its 12-month seasonally adjusted average of 66.4%. There was more respondent commentary in January on tariff impacts and uncertainty, potentially the result of annual contract renewals and geopolitical tensions. Gasoline and diesel fuel continued to be cited as commodities down in price. With the highest Business Activity and Supplier Deliveries index readings since October 2024, indicating higher business activity levels and slower supplier deliveries, whether pricing increases will stick or expand needs to be closely watched.”
INDUSTRY PERFORMANCE
The 11 services industries reporting growth in January — listed in order — are: Health Care & Social Assistance; Utilities; Construction; Retail Trade; Information; Accommodation & Food Services; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Public Administration; Educational Services; and Finance & Insurance. The five industries reporting a contraction in the month of January are: Other Services; Transportation & Warehousing; Management of Companies & Support Services; Arts, Entertainment & Recreation; and Wholesale Trade.
INDUSTRIAL SUPPLY MAGAZINE
The November/December issue of Industrial Supply magazine features an in-depth cover story about Applied Industrial Technologies. Plus, we're featuring articles by contributing writers Dr. Bharani Nagarathnam and Frank Hurtte, as well as interviews with numerous product and distribution industry experts.
