The Services PMI (Purchasing Managers’ Index) is an essential indicator of the services sector’s health, covering finance, retail, healthcare, and hospitality. A PMI above 50 signals growth, while below 50 indicates a slowdown.
Two key organizations publish these reports:
- S&P Global: This Services PMI surveys a wide range of service sector companies in the U.S. and globally. It’s known for its extensive sample size and advanced methodology, providing early and detailed business condition insights.
- Institute for Supply Management (ISM): The ISM’s Non-Manufacturing PMI includes data from purchasing and supply executives across various industries, such as construction, utilities, and government administration. This survey, with its long history, focuses more on larger companies.
Both indices are closely monitored by economists and investors for valuable information about services sector performance and trends. A PMI above 50 indicates sector expansion, while below 50 signals contraction.
January S&P Global Services PMI
In January, five out of seven US sectors saw an increase in business activity, which is the lowest since September 2024. The Technology sector saw a downturn in output. Most sectors slowed down compared to December, except for Consumer Goods, which saw strong growth.
Financials was the fastest-growing sector, with a Business Activity Index of 55.7, showing strong expansion even though it was lower than December’s high. Private sector growth was supported by higher consumer spending, with Consumer Services and Consumer Goods seeing significant rises in activity. Healthcare and Industrials had modest growth, with Industrials experiencing the slowest increase in output over the past year. Both the Basic Materials and Technology sectors had slight reductions in activity, with Basic Materials having the slowest decrease since July 2024.
Source: spglobal
January ISM Services PMI
The January 2025 Services ISM Report indicated that the services sector expanded for the seventh consecutive month. The Services PMI was 52.8, showing continued growth.
Business activity and new orders also expanded, though at a slower rate, with the Business Activity Index at 54.5 and the New Orders Index at 51.3.
Employment in the services sector remained in expansion with an index of 52.3, while supplier deliveries were slower, registering at 53.
Prices increased, although at a slower pace than in December, with the Prices Index at 60.4.
Inventories contracted for the third month, standing at 47.5, but the Inventory Sentiment Index grew slightly to 53.5. The Backlog of Orders Index remained in contraction at 44.8.
Fourteen services industries reported growth, including Agriculture, Accommodation, Finance, and Healthcare, while three industries, including Real Estate and Professional Services, reported contraction.
Source: ISM
Impacts of Report on Stock Market
The ISM Services Report and the S&P Global Services Report can have significant impacts on the stock market because they provide insights into the health of the services sector, which is a major component of the economy. These reports are considered leading indicators of economic health.
Despite the expansion in the services sector, some areas experienced contraction. Overall, the growth in services has slowed down.
