US services sector improves in January after ending 2022 in contraction

economic activity in the The U.S. services sector improved in January after recording 30 consecutive months of growth in December, as shown by the sector indicator established by the Federal Statistical Office. Institute for Supply Management (ISM), which stood at 55.2 points in the first month of the year.This figure is above the 50 point mark, which separates growth from contraction, and at 49.2 points in December.

The website business activity index rose to 60.4 points, an increase of 6.9 points from the December reading, while the New orders figure rose in January after contracting in December for the first time since May 2020. The site price indicator fell 0.3 points in January to 67.8, as inventories contracted for the eighth consecutive month.

Ten industries recorded growth in January. Although responses vary by industry and company, most respondents indicated that the business trend is positive. Employment remained unchanged during the month. Some companies are still struggling to fill vacancies, while others are easing staff cuts,” he notes. Anthony NievesChairman of the ISM Business Survey Committee.

The website 10 growing service industries in January.are, in order, agriculture, forestry, fishing and hunting, utilities, other services, business management and support services, public administration, educational services, l accommodation and catering, real estate, rental and leasing, health and social care, and professional, scientific and technical services.

The analysts of Oxford Economics notes that “despite the rebound of the ISM, thehe long-term downturn in the services sector remains intact. and a significant rebound is unlikely in the coming months as demand cools following Fed rate hikes and past tightening of financial conditions.”

Of Macroeconomics Hall of Fame point out that ” disinflation is underway in the services sectordespite protests from the Fed, and will simply accelerate if the labor market weakens as we expect in the coming months.”

“We feared that the December drop could be the start of a sudden and long-lasting bearish jolt, after a virtually flat trend for the previous six months. But the January’s Upside Surprise Rather, December appears to be temporarily deviating from this stable trend, perhaps due to winter storms in late December that temporarily depressed activity,” they add.


On another side, the PMI index compiled by S&P Global Market shows a more pessimistic reading.The PMI, which pushes the sector into a “solid contraction”, came in at 46.8, a slight improvement from 46.6 the previous month.

The agency releasing the data points out that ” the fall in production resulted from a further weakening of domestic and external demand conditionswhile new business and new export orders declined. Businesses have continued to increase their workforce despite lower labor hoarding, but the pace of employment decline has slowed further amid cost-cutting efforts.

The website cost inflation rebounded for the first time in eight months. The faster increase in production costs was not reflected in end prices, which rose at the slowest pace since October 2020. Companies pointed out that inflation and high interest rates weighed on customer spending.

In addition to weak domestic sales, New export orders also fell in January.. The contraction rate of new business from overseas accelerated and was one of the strongest since May 2020, due to uncertainty and high inflation in major export markets.

Chris Williamsonchief business economist at S&P Global Market, points out that “Business activity in the vast services economy contracted in January. Firms reported a further deterioration in new business flows. Hiring has all but stopped as companies reassess their staffing needs in light of a weaker demand environment.”

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