Services Sector Expands (More Slowly) for January

The services sector expanded in January for the 37th consecutive month, according to the Institute for Supply Management's Report on Business released today.

The Institute's Non-Manufacturing Index registered 55.2% for January, 0.5 percentage points lower than the seasonally adjusted 55.7% registered in December and indicating continued growth at a slightly slower rate, according to the ISM. Market analysts had expected as much, and their 55.1% prediction came in just 0.1 percentage points below the actual index. A reading above 50% indicates expansion.

A retail trade representative surveyed for the report and quoted in the press release described the economic environment as hesitantly growing: "There seems to be some stabilization in recent months. Business seems a little more confident, and consumers are participating once again."

The Non-Manufacturing Index is a composite of different indicators including business activity, new orders, employment, and prices. The employment index posted especially strong gains, jumping 2.2 percentage points, indicating growth in employment for the sixth consecutive month. Inventories and backlogs of orders both contracted in January, while the inventory sentiment's 6-percentage-point increase is a warning sign of "too high" growth in inventories, according to the ISM.

This new report comes four days after the Institute reported a 2.9-percentage-point increase in its Manufacturing Index for January.

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