Service sector expands in January for 53rd consecutive month
Economic activity in the services sector expanded for the seventh consecutive month in January, say the nation’s purchasing and supply executives in the latest Services ISM Report On Business. The Services PMI registered 52.8%, indicating expansion for the 53rd time in 56 months since recovery from the coronavirus pandemic-induced recession began in June 2020.
The report was issued today by Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management (ISM) Services Business Survey Committee: “In January, the Services PMI registered 52.8%, 1.2 percentage points lower than the seasonally adjusted December figure of 54%. 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.
“The Supplier Deliveries Index registered 53%, 0.5 percentage point higher than the 52.5% recorded in December. This is the second consecutive month the index has been in expansion territory, indicating slower supplier delivery performance. (Supplier Deliveries is the only ISM® Report On Business® 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 60.4% in January, a 4-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%.
“Fourteen industries reported growth in January, five more than the previous month’s total. The Services PMI has expanded in 23 of the last 25 months dating back to January 2023. The January reading of 52.8% is below the January 2024 reading of 53.2% but 0.4 percentage point above the 2024 average PMI® reading of 52.4.”
Miller continues, “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.”
INDUSTRY PERFORMANCE
The 14 services industries reporting growth in January — listed in order — are: 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 a contraction in the month of January are: Other Services; Real Estate, Rental & Leasing; and Professional, Scientific & Technical Services.
WHAT RESPONDENTS ARE SAYING
• “Expecting considerable new projects to move to execution by second quarter in the energy market within the U.S.” [Construction]
• “Business conditions seem to be stable for us at this time.” [Educational Services]
• “Seeing letters announcing higher pricing from suppliers for 2025. Relying more on analytics to find the lowest impact on cost while keeping the quality high.” [Health Care & Social Assistance]
• “The paper market is starting to tighten up on the groundwood grades. All the North American mills are pushing dates into late February. It’s not causing any shortages yet, but it’s the first time in over a year that dates are moving out.” [Information]
• “Some apprehension exists with stakeholders and suppliers with government changes and potential tariff burdens.” [Management of Companies & Support Services]
• “The threat of tariffs is causing prices to rise. The threat of unstable international markets is resulting in shortages for various materials.” [Professional, Scientific & Technical Services]
• “Concern going forward is the cost of materials and project work, if any tariffs go into effect.” [Real Estate, Rental & Leasing]
• “Holiday sales not as robust as hoped for. Will need to adjust future planning.” [Retail Trade]
• “The employment market is softening as we are seeing less natural turn and getting more and better-qualified applicants. Also, requests for our services have continued to increase.” [Transportation & Warehousing]
• “Business is picking up but still slower than expected for January. We have had a lot of warehouse closures due to weather.” [Wholesale Trade]
INDUSTRIAL SUPPLY MAGAZINE
The January/February issue of Industrial Supply magazine features an in-depth cover story about MSC Industrial Supply. 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.
