The services sector saw increased activity in January, pointing to ongoing moderate economic growth. Growth in services was led by increases in new orders, according to the Institute for Supply Management (ISM), with the ISM non-manufacturing index coming in at 55.5.
- The ISM non-manufacturing index came in at 55.5 in January, the highest level since August.
- The reading was slightly above expectations of 55.0, and December results were revised downward by 0.1.
New orders contributed to increased activity in the services sector, according to the latest ISM non-manufacturing index. While consumer spending is slowing, the economy appears to be well-positioned to continue its moderate expansion. US GDP came in at 2.3% last year vs. 2.9% the year before, hitting the lowest point since 2016.
New orders rose from 55.3 to 56.2 in January, while order backlogs continued to contract. Employment dipped to 53.1 last month from 54.8 in December, a result of reduced demand and an ongoing shortage of skilled laborers.
Meanwhile manufacturing, which has contracted for five months, picked up again in January according to a separate ISM survey released on Monday. Manufacturing, which accounts for 11% of the US economy, has suffered under the 19-month trade war between the US and China, which has recently started to deescalate. However, the scandal surrounding fatal crashes from a line of Boeing aircraft has created an additional drag on the industry.
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Anthony Nieves, chair of the ISM Non-Manufacturing Business Survey Committee said "The non-manufacturing sector exhibited continued growth in January. The respondents remain mostly positive about business conditions and the overall economy. Respondents continue to have difficulty with labor resources.”
CIBC senior economist Avery Shenfeld stated “The ISM services index continued to crawl back from the lows seen back in September, but it remains below the average seen in the past five years.”
Gold prices have regained momentum which was curbed earlier in the day following the release of a strong labor report. Spot gold last traded at $1,557.37/oz, up 0.45% with a high of $1,562.13/oz and a low of $1,548.42/oz. It’s possible that the ongoing coronavirus crisis is feeding increased risk appetite in the financial markets.