ISM non-manufacturing index falls more than expected

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The U.S. services sector expanded at a slower pace in January as the non-manufacturing index dropped to 56.7 from 58.0 in December, on a seasonally adjusted basis, the Institute for Supply Management reported Tuesday.

An index reading below 50 signals a slowing economy, while a level above 50 suggests expansion.

Economists polled by IFR Markets had expected a 57.0 level.

The prices paid index rose to 59.4 from 58.0, the employment index gained to 57.8 from 56.6.

The business activity/production index fell to 59.7 from 61.2, the new orders index was at 57.7, down from 62.7; backlog of orders increased to 52.5 from 50.5; new export orders slumped to 50.5 from 59.5; inventories declined to 49.0 from 51.5; inventory sentiment grew to 60.5 from 59.0; the supplier deliveries index remained 51.5; and imports dipped to 52.0 from 53.5.

Members' general comments on business in the month included:

  • “Business has slowed well below expectations as our customers deal with the effects of economic situations exacerbated by the government shutdown.” (Construction)
  • “The government shutdown is not affecting our business at this time.” (Finance & Insurance)
  • “Prices are volatile due to tariff restrictions.” (Management of Companies & Support Services)
  • “We are trying to hold out through the government shutdown. Currently, our work is continuing with already obligated prior-year funds. We have not had to suspend any activities. The shutdown is affecting the United States Agency for International Development’s [USAID] and the Department of State’s ability to process actions, share information or plan for the future. That is the shutdown’s effect on us. The longer it lasts, the greater the disruption.” (Professional, Scientific & Technical Services)
  • “Apprehension regarding overall economic conditions due to uncertainly of the partial government shutdown, its effect on business climate and lack of national strategic direction. Economic activity remains strong locally; however, there is concern that this may change quickly due to uncertainty and reports of slowing economic indicators.” (Public Administration)
  • “Order input stable, and supplier deliveries growing. The industry is struggling with capacity constraints.” (Real Estate, Rental & Leasing)
  • “Things are steady. We’re trying to mitigate any impact of the tariffs.” (Retail Trade)
  • “The shutdown and potential delay in tax refunds will hurt our business.” (Wholesale Trade)
  • “Central processing unit (CPU) shortages continue to impact fulfillment of orders.” (Transportation & Warehousing)
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