The numbers: A barometer of business conditions at service-oriented companies rose in January to a four-month high in a burst of fresh optimism about the U.S. economy.
The Institute for Supply Management’s survey climbed to 53.5% from 50.5% in the prior month. The index had fallen in December to a seven-month low.
Economists by polled by the Wall Street Journal had predicted an ISM reading of 52.0%
Numbers over 50% are viewed as positive for the economy. The index ranged between 50% and 55% throughout 2023.
“The majority of respondents indicate that business is steady. They are optimistic about the economy due to the potential impact of interest rate cuts,” said Anthony Nieves, chairman of the survey.
Big picture: The economy never really slowed down last year even after the Federal Reserve jacked up interest rates to a 23-year high to try to tame inflation.
If anything, growth appears to have perked up early in 2024 amid the looming prospect of interest-rate cuts later in the year.
The January jobs report showed another strong month of employment.
Key details:
- The production gauge was unchanged at 55.8%.
- The new-orders index rose 2.2 points to 55.0%.
- The employment barometer rebounded to a 50.5% after sinking to a three-and-a-half-year low of 43.8% at the end of 2023.
- The prices-paid index, a measure of inflation, jumped 7.3 points to 64.0%. That’s a 14-month high. Businesses are “are cautious due to inflation, associated cost pressures and ongoing geopolitical conflicts,” Nieves said.
Looking ahead: “Economy signals are mixed. Some sectors are booming and some — like solar and wind power, ship building and electric vehicles — are slowing down,” a senior retail executive told ISM.
“But overall, the economy is in good shape and there is no imminent threat of a recession.”
Market reaction: In early Monday trades, the Dow Jones Industrial Average
DJIA,
and S&P 500
SPX,
both declined.
