ISM: Service Sector Shrinks in January

The ISM Services Index registered 59.9% in January; 2.4 percentage points below the December reading of 62.3%. This reading represents the twentieth straight month of growth for the services sector, which has expanded for all but two of the last 144 months.

Fifteen non-manufacturing industries reported growth in January. Survey respondents noted “Supply constraints and outages persist. With mechanical component parts, the problems are severe. We are finding widespread depletion of field service part inventories to sustain factory production of new product orders. The inability to satisfy replacement part demand creates tremendous operational risk.”

The Business Activity Index registered 59.9% in January, a decrease of 8.4 percentage points from the December reading of 68.3%. This represents growth for the twentieth consecutive month.

Service sector employment grew in January for the seventh month, and registered 52.3% in January, 2.4 percentage points lower than December. Five industries reported growth in employment for the month.

The New Orders Index was 61.7%, down 0.4% from the prior month. Comments from respondents include: “All sectors, excluding automotive (due to chip shortages), are accelerating quickly and placing new orders” and “New orders have been increasing, but they slowed to the same level as last month due to inflationary pricing concerns.”

The supplier deliveries index registered 65.7% in January, up 1.8% from the prior month. A reading above 50% indicates slower deliveries.

 

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