The January U.S. Services Purchasing Managers' Index (PMI) from S&P Global came in at 52.9, slightly above the 52.8 forecast. The reading marks the 24th consecutive month of expansion but is the weakest since April.
From the latest press release, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said:
"Service sector businesses reported a slowdown at the start of 2025, with activity levels growing at a reduced pace compared to the robust gains seen late last year. Looking at the manufacturing and services PMI surveys together, a 1.6%
annualized GDP growth rate is signaled for January. That compares with a 2.4% growth signal for the fourth quarter of 2024, for which official data currently estimates a 2.3% GDP gain.“However, at least some of this cooling off seems to be related to disruptions caused by unusually adverse weather, hinting that growth in the services sector could revive in February. A marked upturn in hiring further supports the view that robust growth should resume. Manufacturing output also staged a welcome return to growth during the month which, if sustained, should feed through to benefit affiliated services such as transportation and logistics.
“That said, the survey also recorded signs of softer demand conditions, notably where demand is heavily influenced by changing interest rate expectations, such as financial services. Business optimism has also cooled slightly, which is unlikely to have been influenced to the weather, reflecting some pull-back in the buoyant post-election optimism seen in December. It will therefore be interesting to watch the coming month’s data to see if the post-election honeymoon of improved optimism and resurgent demand has started to wane.
“Meanwhile, hopes of more rate cuts will be further diminished by the combination of increased hiring, reports of labor supply difficulties, and an upturn in price pressures."
Background on the S&P Global US Services PMI
The S&P Global US Services PMI™ measures the activity level of purchasing mangers in the services sector through a questionnaire of ~400 service sector companies. The sectors covered include consumer (excluding retail), transportation, information, communication, finance, insurance, real estate, and business services. The S&P Services PMI is a diffusion index, meaning that a reading above 50 indicates expansion in the sector compared to the previous month and a reading below 50 indicates contraction.
Here is a snapshot of the series since mid-2012.