U.S. ISM Services Index (January 2026)

ISM Services steady in January despite large drop in export orders

• The ISM Services index held steady in January at 53.8. This is the fourth consecutive month of expansion. Eleven industries out of 18 reported expansion, the same as last month. 
• The supplies delivery index moved deeper into in expansionary territory in January, marking the 14th consecutive month it has been in expansion. It increased 2.4 points to 54.2, indicating slower deliveries, which is expected when customer demand is increasing.
• New Orders gave back some of its gains after a large increase last month, falling 3.4 points but remaining in expansionary territory at 53.1. The business activity posted its highest reading since October 2024, a sign of higher activity. 
• New export orders showed a large decline, falling to 45.0 from 54.2 in the month prior. 
• The prices index increased by 1.5 points to 65.1, indicating that price pressures are still prevalent. The employment index managed to remain in expansionary territory, falling to 50.3 from 51.7.

Key Implications

• This report affirms that demand in the service sector remains reasonably strong, as we can see in the relatively strong performance of the new orders and business activity sub-indexes. The combination of expanding activity and slower supplier deliveries does raise the specter of price increases. We will get a more direct read on this in next week's CPI release, but the trend of steady employment growth, increasing demand, and increasing price pressures amplify the risk that rates take longer to come down again. 
• The biggest change in the details of this report is the outsized drop in the new export orders index, which plummeted 9.2 points into contractionary territory and to its lowest reading since March 2023. Respondents indicated that both tariffs and travel restrictions are significantly impacting export orders. Despite the large decrease in the index, only seven industries reported a decrease, meaning that this may not be the bottom for export orders if trade uncertainty continues. There is still the risk that this could spread to the other 11 industries, with the potential to further drag down service activity as a whole. 

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