Bulletin
Investor Alert

London Markets Close in:

Economic Report Archives | Email alerts

Feb. 5, 2020, 11:59 a.m. EST

The huge services side of the U.S. economy grew in January at fastest pace in 6 months

ISM nonmanufacturing index climbs to 55.5% from 54.9%

new
Watchlist Relevance
LEARN MORE

Want to see how this story relates to your watchlist?

Just add items to create a watchlist now:

  • X
    Dow Jones Industrial Average (DJIA)
  • X
    S&P 500 Index (SPX)
  • X
    U.S. 10 Year Treasury Note (TMUBMUSD10Y)

or Cancel Already have a watchlist? Log In

By Jeffry Bartash, MarketWatch


Getty Images
Restaurants and other service-oriented companies that now dominate the U.S. economy expanded in January at the fastest pace since last summer.

The numbers: The huge services side of the U.S. economy that employs most Americans grew in January at the fastest pace since last summer, with many companies saying they got off to a good start at the beginning of the new year.

The Institute for Supply Management said its index of service-oriented companies such as hospitals, retailers and restaurants rose to a six-month high of 55.5% last month from 54.9% in December. The increase exceeded the MarketWatch forecast of 55%.

Numbers over 50% are viewed as positive for the economy, and anything over 55% is considered exceptional.

Read: Coronavirus spreads damage to Wall Street. Could the U.S. economy be next?

What happened: New orders rose slightly in January and production hit the highest level since August, suggesting in improvement in business conditions in early 2020.

“Outlook remains favorable for growth in 2020,” said an food-industry executive. “First-quarter sales are improving, which makes us more optimistic,” said a construction executive.

Hiring and employment grew more slowly, but executives still say the biggest problem is finding skilled workers to fill open positions.

“The labor market continues to be a challenge, impacting capacity and pushing up costs,” said an executive at a firm that helps companies to manage their businesses.

Altogether, 12 of the 18 industries tracked by ISM said their businesses were expanding.

One caveat: The survey results were completed just as the coronavirus outbreak became a major headline.

Read: Wage growth in the U.S. is no longer accelerating

Also: These states had the lowest unemployment rates in 2019. What about swing states?

Big picture: The U.S. service sector has largely been shielded from the damaging effects of the trade war with China that disrupted the global economy, hurt exports and caused the U.S. manufacturing sector to contract during the fall.

Read: Manufacturers grow for first time in 6 months — but that was before coronavirus

Most Americans are secure in their jobs and very confident in the economy, spending at levels that ensure the U.S. should keep expanding for a record 11th straight year.

What they are saying?: “The run of positive news for January continues: manufacturing and nonmanufacturing ISM, auto sales, consumer confidence, jobless claims,” said senior economist Jennifer Lee of BMO Capital Markets. “But the big unknown [coronavirus] is still, well, unknown.”

Market reaction: The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA -0.28% and S&P 500 /zigman2/quotes/210599714/realtime SPX -0.13% rose in Wednesday trades. Stocks have rebounded from a selloff that took place after the outbreak of the coronavirus last month.

The 10-year Treasury yield /zigman2/quotes/211347051/realtime BX:TMUBMUSD10Y +1.81% rose again to 1.64%.

/zigman2/quotes/210598065/realtime
US : Dow Jones Global
27,309.70
-77.28 -0.28%
Volume: 95.69M
Aug. 7, 2020 11:18a
loading...
/zigman2/quotes/210599714/realtime
US : S&P US
3,344.84
-4.32 -0.13%
Volume: 665.28M
Aug. 7, 2020 11:18a
loading...
/zigman2/quotes/211347051/realtime
add Add to watchlist BX:TMUBMUSD10Y
BX : Tullett Prebon
0.55
+0.0098 +1.81%
Volume: 0.00
Aug. 7, 2020 11:18a
loading...

Jeffry Bartash is a reporter for MarketWatch in Washington.

This Story has 0 Comments
Be the first to comment
More News In
Economy & Politics

Story Conversation

Commenting FAQs »
Link to MarketWatch's Slice.