US services sector activity picks up in January as outlook brightens -ISM

Growth in America's services sector picked up unexpectedly at the start of the year, driven by higher new orders and employment, according to the results of a closely-followed survey.

The Institute for Supply Management's services PMI increased from a reading of 57.7 for December to 58.7 in January.

Economists had penciled-in a reading of 56.0.

A gauge of business activity dipped from 60.5 to 59.9 but the latter was nevertheless still a strong reading.

In parallel, new orders accelerated from the previous month's already quick pace, with a sub-index tracking those advancing from 58.6 to 61.8.

The subindex for employment also strengthened, rising past the 50.0 point threshold denoting growth, from a level of 48.7 to 55.2.

A subindex for order backlogs meanwhile rose 48.7 to 50.9.

Inventory levels on the other hand fell a bit, as denoted by a drop in the subindex linked to them falling from 58.2 to 49.2.

Survey respondents from many sectors cited an improved outlook, although some such as from the Accommodation sector said there were still a few "challenging" months ahead.

The assessment of the situation in the Health Care sector was especially downbeat, with one survey respondent reporting that elective surgeries were having to be cancelled and that the number of free beds was limited.

For his part, a respondent from the Information sector said that a shortage of copper was slowing deliveries of key network equipment.

Ian Shepherdson at Pantheon Macroeconomics labelled the report "encouraging" given the third wave of the Covid-19 pandemic that unfolded during the month.

However he pointed out how the index had failed to warn of the "collapse" in growth between the third and fourth quarters of 2020.

Hence, he said, the ISM PMI was "not necessarily very reliable".

He also said that the "remarkable" improvement in the subindex for employment was "inconsistent" with the real-time data on the jobs market and the fact that most lockdown restrictions remained in place.