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US services sector activity rebounds in January

By Alexander Bueso

Date: Friday 03 Feb 2023

US services sector activity rebounds in January

(Sharecast News) - Activity in the US services sector rebounded sharply at the beginning of the year, led by a surge in new orders, the results of a closely followed survey revealed.
The Institute for Supply Management's services sector Purchasing Managers' Index increased from a reading of 49.2 in December to 55.2 for January (consensus: 50.4).

A key sub-index linked to new orders drove the improvement, rising by 15.2 points to 60.4

The sub-index for production also rose, from 53.5 to 60.4.

In parallel, the sub-index for price pressures was little changed at 67.8, versus 68.1 in the month before.

However, a gauge of firms' hiring only edged up from 49.4 to 50.0, which in theory indicated no growth in employment.

For all of the indices and subindices the 50 point level marked threshold between an expansion and a contraction.

Commenting on the latest ISM numbers, Ian Shepherdson, chief economist at Pantheon Macroeconomics, pointed out how the PMI had nearly recouped all of the previous month's unexpected plunge at the time from 56.5 to 49.2.

Shepherdson said December's decline might have been caused by winter storms, although as he noted, the weather in January had been "unsually warm, and that won't persist, either."

"Our base case is that activity in the service sector will soften from here, but not collapse."

As well, given the latest reading for the employment sub-index, the economist said that he "struggled" to explain the bumper non-farm payroll growth figures published earlier during the same session.

"Accordingly, we expect a correction in payroll growth in February."

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