U.S. ISM Services Index (January 2024)

Andrew Hencic, Senior Economist | 416-944-5307 

Date Published: February 5, 2024

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ISM shows services sector expansion accelerates in January

  • The ISM Services PMI jumped to 53.4 in January from 50.6 in December, comfortably beating the 52.0 consensus expectation. Ten industries out of 18 reported growth for the month – up from nine in December. 
  • The business activity sub-index was unchanged at 55.8, while the new orders index rose to 55.0 from 52.8 in December. 
  • The prices paid component jumped 7.3 percentage points (pp) to 64.0. The supplier deliveries sub-index rose to 52.4, the highest print since November 2022, and indicates longer delivery times compared to December. 
  • The employment sub-component flipped to signaling growth, as it jumped 6.7 pp to 50.5.   

Key Implications

  • Well, a healthy print from the services sector today. At 53.4, the index shows the sector continues to grow at a healthy clip, with new demand growth reaccelerating again in January. Moreover, the recovery in employment growth suggests December's contractionary reading was an outlier rather than a structural shift. 
  • After Friday's gangbusters payrolls report showed 289k new jobs in the private services sector, today's ISM doesn't come as much of a surprise. If anything it only confirms what we already knew – the U.S. economy continues to chug along and show remarkable strength given the interest rate backdrop. Looking forward, eyes should be focused on whether the uptick in input price inflation is sustained and whether it feeds through to consumers.     

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