Economic activity in the services sector grew in January after contracting in December following 30 consecutive months of growth, with the Services PMI registering 55.2%, according to the latest Services ISM Report On Business from the Institute for Supply Management.

“In January, the Services PMI registered 55.2%, six percentage points higher than December’s seasonally adjusted reading of 49.2%,” Anthony Nieves, chair of the services business survey committee at the ISM, said. “The composite index grew in January after contracting in December for the first time since May 2020, when it registered 45.4% (seasonally adjusted). The Business Activity Index registered 60.4%, a 6.9-percentage point increase compared to the seasonally adjusted reading of 53.5% in December. The New Orders Index grew in January after contracting in December for the first time since May 2020; the figure of 60.4% is 15.2 percentage points higher than the seasonally adjusted December reading of 45.2%.

“The Supplier Deliveries registered 50% in January, indicating unchanged performance. The index registered 1.5 percentage points higher than the 48.5% reported in December. (Supplier Deliveries is the only ISM Report On Business index that is inversed; a reading of above 50% indicates slower deliveries, which is typical as the economy improves and customer demand increases.)

“The Prices Index was down 0.3 percentage point in January, to 67.8%. The Inventories Index contracted for the eighth consecutive month; the reading of 49.2% is up 4.1 percentage points from December’s figure of 45.1%,” Nieves said. “The Inventory Sentiment Index (55.8%, down 0.1 percentage point from December’s reading of 55.9%) expanded for the second consecutive month after four straight months in contraction.

“Ten industries reported growth in January, according to the Services PMI, which was in expansion territory after a single month of contraction and the prior 30-month period of growth. The composite index has indicated expansion for all but three of the previous 155 months.

“Business Survey Committee respondents indicated that capacity and logistics performance continue to improve. Although responses varied by industry and company, the majority of panelists indicated that business is trending in a positive direction. Employment was unchanged for the month. Some companies still find it difficult to fill open positions, while others are facilitating staff reductions.”