Economic activity in the services sector continued to expand in January. The ISM Services Index indicated expansion at 53.8% to start 2026 as it finished 2025, on a positive note. A value above 50 reflects expansion in the services sector while a value below 50 represents a contraction.
“In January, the Services PMI® registered a reading of 53.8%, the same as the seasonally adjusted December figure of 53.8% and a 19th consecutive month of expansion. The Business Activity Index continued in expansion territory in January, registering 57.4%, 2.2 percentage points (pp) higher than the seasonally adjusted reading of 55.2% recorded in December,” said Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee. Respondents from accommodation & food services said, “The uncertainty of U.S. tariff policies continues to affect our purchasing. The proliferation of AI is affecting how we purchase services, particularly getting more value out of service contracts and taking a harder look at risk.”
The New Orders Index dropped to 53.1% in January, remaining in expansion territory but 3.4 pp lower than the seasonally adjusted reading of 56.5% reported in December. The index has been in expansion territory in 35 of the last 37 months. Respondents from retail trade said, “Solid holiday performance across most units. January is even better. Consumers are still buying discretionary goods.”
The Inventories Index returned to contraction territory after two months of expansion, registering 45.1%, a 9.1 pp decrease compared to the 54.2% reported in December. Services Inventory Sentiment Index was in expansion (or “too high”) territory for the 33rd consecutive month in January; the reading of 54.3% is an increase of 0.2 pp from December’s figure of 54.1%. The Backlog of Orders Index was in contraction territory for the 11th consecutive month, and the reading of 44% was a 1.4 pp increase compared to the 42.6% reported in December.
Read the ISM release.
