ISM Services Indicator Holds Steady as Manufacturing Rebounds

Recent data from the Institute for Supply Management reveals a nuanced picture of the U.S. economic landscape. The ISM services sector gauge remained flat at 53.8, maintaining the previous month’s level and signaling continued expansion despite economist expectations for a slight decline to 53.5. This stability underscores the resilience of the services-driven U.S. economy, where any reading above 50 points to sector growth.

Services Strength Tempered by Mixed Subindex Signals

The ISM services breakdown presents a more complex narrative. While the business activity component climbed to 57.4, suggesting robust operational momentum, new orders retreated to 53.1 from 56.5, indicating some caution in near-term demand. Employment conditions softened slightly to 50.3, yet remained above the 50 growth threshold for a second consecutive period. “December and the following month exhibited parallel performance across subcomponents, though the latest readings show year-over-year strength averaging 0.7 percentage points,” noted the chair of the ISM Services Business Survey Committee.

The pricing index presents a growing concern, rising to 66.6 and marking the 14th straight month above 60. This persistent elevation signals that inflationary pressures continue to weigh on service providers, even as top-line activity holds steady.

Manufacturing Delivers Surprise Rebound in Latest ISM Assessment

In a striking contrast, the manufacturing sector rebounded unexpectedly with its ISM index climbing to 52.6, reversing a 12-month contraction trend. This marks the first expansion in over a year, with the jump from 47.9 exceeding analyst forecasts of a modest 48.5 reading. The manufacturing turnaround suggests a potential shift in the broader economic cycle, even as service sector momentum remains steady rather than accelerating.