The US services sector saw economic activity increase in January but at the slowest pace since February 2021, the Institute for Supply Management reported today. Employment activity also increased at a slower rate than the prior month.
The report’s “Services PMI” fell to reading of 59.9% in January from December’s reading of 62.3%. Readings above 50% indicate growth, with higher numbers indicating quicker growth; January’s reading indicates growth for the 20th consecutive month after a two-month contraction in April and May 2020.
January’s growth pace was the slowest in nearly a year as a surge in Covid-19 cases and lingering supply constraints weighed on business activity, Bloomberg reported.
“Although there was a pullback for most of the subindexes in January, the rate of growth remains strong for the services sector, which has expanded for all but two of the last 144 months,” said Anthony Nieves, chair of the Institute for Supply Management Services Business Survey Committee. “Respondents continue to be impacted by coronavirus pandemic-related supply chain issues, including capacity constraints, demand-pull inflation, logistical challenges and labor shortages.
“Moreover, the Covid-19 omicron variant has disrupted operations, especially through reduced staffing levels,” Nieves continued. “Despite these impediments, business activity and economic growth continue.”
Fifteen of the 18 services industries that comprise the Services PMI reported growth.
The ISM’s report also found that employment activity in the services sector grew in January for the seventh consecutive month after contracting in June 2021. However, the pace of growth slowed.
The services employment index fell to a reading of 52.3% in January from 54.7% in December. The employment index is one of four diffusion indexes that comprise the composite Services PMI. The other diffusion indexes are new orders, production and inventories.
The report is based on a survey of purchasing and supply executives nationwide. Comments from respondents include: “Hiring in multiple departments” and “Employees are still being recruited by the private sector, away from the public sector; some (companies are) offering 100% remote work to entice them.”