Services Sector Growth Continues in January Though Price Pressures Persist, 2 Surveys Show

02:47 PM EST, 02/04/2026 (MT Newswires) -- The US services sector saw continued expansion in January as employment grew, though price pressures persisted, two separate surveys showed Wednesday.

The Institute for Supply Management's services purchasing managers' index held steady at 53.8 last month sequentially. The consensus was for a 53.5 print in a survey compiled by Bloomberg. A reading above 50 indicates the services sector economy is generally expanding.

The gauge for business activity advanced to 57.4 from 55.2, while new orders growth eased to 53.1 from 56.5. The employment measure fell to 50.3 from 51.7, but marked a second straight monthly expansion, while the prices index rose to 66.6 from 65.1, according to ISM data.

The report affirms that services sector demand continues to be "reasonably strong," Vikram Rai, a senior economist at TD Economics, said in a note.

"The combination of expanding activity and slower supplier deliveries does raise the specter of price increases," Rai wrote. "We will get a more direct read on this in next week's (consumer price index) release, but the trend of steady employment growth, increasing demand, and increasing price pressures amplify the risk that rates take longer to come down again."

Separately, S&P Global (SPGI) said its services PMI gauge edged up to 52.7 in January from 52.5 the previous month. The consensus on Bloomberg was for an unchanged reading.

Firms reported the "steepest reduction" in foreign demand in more than three years, while inflation rates continued to be elevated and staffing levels rose marginally last month, the data provider said. Sentiment regarding the outlook took a hit, due in part to tariffs and political uncertainty, according to the report.

"Sustained service sector growth, supported by a robust rise in manufacturing output in January, indicates the economy is growing at an annualized rate of around 1.7%," S&P Global Market Intelligence Chief Business Economist Chris Williamson said. "However, that's a lower gear compared to the pace of expansion seen prior to December's slowdown, and hints at (gross domestic product) growth cooling in the first quarter."

On Monday, ISM and S&P Global (SPGI) data showed the US manufacturing sector expanded in January amid strong production, while price pressures intensified.

"Consumer-facing companies are increasingly reporting a challenging environment, with demand for services falling in January having nearly stalled in December, reflecting low levels of consumer sentiment and cost of living pressures," Williamson said.

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