ISM January Non-Manufacturing PMI Shows Steady Expansion with Weak Orders and Orderbacking Signals (Jan 4, 2026)

The U.S. nonmanufacturing sector expanded in January, with business activity posting the fastest growth since October 2024 in two consecutive months. However, key sub-indexes indicate softening demand: new orders and employment growth slowed, while price pressures rose, signaling potential deceleration. Core data: ISM Non-Manufacturing PMI = 53.8 (expansion), up from 50.0 (expansion) in December. New Orders = 53.1 (vs. 56.5); Employment = 50.3 (vs. 51.7); Prices = 66.6 (vs. 65.1). Strength came from commercial activity (57.4, +2.2 mo/m) and sectors including healthcare, utilities, construction, and retail. Weaknesses included transportation and warehousing. New and export orders declined, with export orders at a 2.5-month low, reflecting weaker global demand amid geopolitical tensions and trade policy shifts. Price pressures climbed to a three-month high (66.6) as tariffs and wage growth increased input costs. Supplier delivery times rose to 54.2 (vs. 51.8), logistics disruptions from cold weather contributed to longer lead times. Service sector inventories fell sharply to 45.1 (vs. 54.2), and employment growth moderated to 50.3 (vs. 51.7). The S&P Global PMI composite index for services rose to 52.7, with business confidence weakening and consumer demand approaching a stall due to high living costs and waning consumer confidence.