US service-sector growth accelerates in January, says ISM

Growth in the US services sector unexpectedly picked up slightly in January, though the pace of hiring slowed, according to the Institute for Supply Management (ISM).

The ISM's non-manufacturing index improved 0.2 percentage points (pp) to 56.7% last month, from 56.5% in December, led by growth in accommodation and food services, finance and insurance.

50% marks the break-even point that separates growth with contraction. Analysts were expecting a slight fall to 56.4%.

The business activity sub-index rose 2.9pp to 61.5% and the new orders sub-index increased 0.3pp to 59.2%, but the employment index dropped 4.1pp to 51.6%.

Economist Paul Ashworth from Capital Economics said the weaker labour-market figure was "a little discouraging".

However, he said that the modest improvement in the headline index "illustrates that the boost to households' purchasing power from lower energy prices is driving domestic demand higher, even as the stronger dollar is squeezing export-orientated manufacturers".