U.S services sector expands more than expected in January

The
Institute of Supply Management (ISM) announced the U.S non-manufacturing
purchasing managers’ index (PMI) for January on Wednesday. The report
highlighted industries to have noted a surge in new orders this month that hinted
at the prospect of continuous economic growth at a moderate pace in the U.S in
2020 despite consumer spending keeping under pressure.

The
economic data on Wednesday revealed the ISM non-manufacturing PMI at 55.5 in
January that marked the best monthly reading since August 2019. The revised
data for December downgraded the previous reading of 55.0 to the current 54.9.
Analysts were expecting the non-manufacturing PMI to print at 55.1 in January.

Services
Sector Accounts For Over 65% Of The U.S Economic Activity

The
services sector currently accounts for over 65% of the total economic activity
in the United States. Posting above 50 and better than the figure for last
month or what the experts were anticipating, January’s reading suggested further
expansion in the U.S services sector.

Earlier
this week, ISM also announced the U.S manufacturing sector to have finally
jumped out of contraction after five months. The manufacturing sector currently
accounts for 11% of the U.S economy. Improvement in both the primary economic
sectors of the United States suggests that the U.S economy is beginning to
climb out of the pressures that the U.S – China trade war had previously
imposed on it.

The
outlook for the upcoming months, however, can be expected to be grimmer with
the largest U.S airplane manufacturer, Boeing, having announced a temporary
halt on production of its 737 Max jetliner that remained grounded since March
2019 after two fatal crashes that killed 346 people. The recent
outbreak of Coronavirus in China that is threatening to become a global
epidemic is likely to disrupt supply chains specifically for electronic
manufacturers that may pose a new challenge for the U.S economy as well.

U.S
Economy Expanded At 2.3% In 2019

U.S
economy expanded at 2.3% in 2019 that was branded its slowest growth since
2016. In 2018, the economy had recorded a significantly higher 2.9% growth.

New
orders sub-index was posted at 56.2 in January versus December’s 55.3. Order backlogs,
on the other hand, remained in the contraction territory in January and weighed
on the U.S services sector. Employment sub-index also dropped to 53.1 this
month versus December’s 54.8, which hinted at weaker job growth attributed to
lower labor demand and scarcer workers.  

In
2019, the U.S
economy added 2.1 million new jobs that marked the worst reading since 2011.
In the previous year, the new jobs count was reported at 2.7 million instead. The
last quarter of 2019 also saw a sharp decline in consumer spending as well.