January 2016 ISM Services Index Declines But Remains In Expansion

The ISM non-manufacturing (aka ISM Services) index continues its growth cycle, but declined from 55.8 to 53.5 (above 50 signals expansion). Important internals likewise declined, however, and remain in expansion. Market PMI Services Index was released this morning, also is in expansion, and also declined.

This was below expectations (from Bloomberg) of 53.0 to 56.5 (consensus 55.5).

For comparison, the Market PMI Services Index was released this morning also – and it weakened marginally. Here is the analysis from Bloomberg:

Released On 2/3/2016 9:45:00 AM For Jan, 2016

	Prior	Consensus	Consensus Range	Actual
Level	54.3	53.7	53.5 to 54.8	53.2

Highlights
Growth is respectable but slowing in the nation’s service sector, based on Markit’s sample where the composite index came in at 53.2 for final January. This is 5 tenths under both Econoday expectations and the mid-month flash and is a sizable 1.1 points below final December. Growth in new orders, reflecting general business caution, is at a 12-month low while backlog orders are in contraction for a 6th straight month. Solid hiring, however, is part of the reason for the drawdown in backlogs though how long employment can continue to rise while new orders are weak is an open question.

Overall business confidence in the sample did rise in the month but remains close to a 3-1/2 year low. Price data remain subdued but, in what would be a positive for the Fed’s efforts to lift inflation, the report does note signs of rising wage pressure.

This report hints at another quarter of subdued growth for the economy. The ISM non-manufacturing report, which samples not only the service sector but also mining and construction, has been showing greater strength. ISM’s January data will be posted later this morning at 10:00 a.m. ET.