US Services Sector Surveys Plunged In January As Prices Rose & Orders Fell

After an unexpected surge in US Manufacturing PMI surveys (Trump Effect?), despite slowing factory orders and a decline in manufacturing jobs (ADP), expectations for the American Services sector were considerably weaker.

Despite a resurgence in US macro ‘hard’ data in January, S&P Global US Services PMI tumbled to 52.9 in January from 56.8 in December (slightly better than the 52.8 flash print in Jan)

The ISM Services index also tumbled, from 54.0 to 52.8 (54.0 exp)…

Source: Bloomberg

Under the hood of the ISM Services index, new orders weakened dramatically, inflation declined but remains hot, but employment improved modestly…

Source: Bloomberg

An interesting pattern has emerged since Trump won the election…

Source: Bloomberg

The S&P Global US Composite PMI Output Index posted 52.7 in January, down from 55.4 in December but still signaling a solid monthly rise in business activity. The US economy remains the strongest compared to the rest of the majors but its lead is fading fast…

Source: Bloomberg

A renewed increase in manufacturing production coincided with a slower rise in services activity.

The rate of expansion in new business also eased in January, but the pace of job creation quickened and was the strongest since June 2022. Meanwhile, both input costs and output prices rose at faster rates.

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.

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.

But they always have an excuse for weakness – and this time it’s the weather (cold storms in the winter???!!! who could have seen that coming?)

“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.

But there were some obvious signs of pressure points building…

“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.”

A glimmer of hope for the doves? Not if prices keep rising like this!~!