U.S. ISM Services Index (February 2025)

ISM services index rises in February, showcasing continued growth in the sector

• The ISM Services index rose 0.7 points to 53.5 in February, ahead of the 52.5 consensus was expecting. As in January, fourteen out of eighteen industries reported growth, in line with the figure from November.  
• Business activity was virtually unchanged, falling 0.1 points to 54.4. New orders growth recovered slightly to 52.1. However, apart from last month and a contraction in June 2024, the sub-index is registering its weakest reading since March 2023.   
• The employment sub-index ticked up again (53.9 vs. 52.3 in January), suggesting growing momentum in payrolls growth. The employment index is at its highest level since December 2021.      
• The prices paid sub-component retraced some of its losses from last month, rising to 62.6, ahead of the 60.4 consensus had been expecting. The trend in the index suggests services prices pressures are likely to persist over the near-term. The three-month moving average of the index is at 62.5, its highest reading since March 2023.   

Key Implications

• A good month for the services sector after a bit of a lull in January. The business activity subindex was barely moved, while improvements in employment and new orders were significant. As with the manufacturing index, the uptick in the prices paid component bears watching as it suggests price growth has ticked up to its highest rate in over a year. 
• Uncertainty remains the name of the game. Tariffs on China, Canada and Mexico are now in place. Negotiations are ongoing amid speculation of potential relief for the latter two countries. Attention is now firmly focused on Friday's payrolls release. Momentum in the services sector looks to have been robust in February, but the employment figures should give a better sense of the whether uncertainty around the announced policies may have started having an impact. 

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