Global Feb. services PMI 53.4; prior 52.8

Global Feb. services PMI 53.4; prior 52.8

The U.S. services sector expanded at a faster pace in January 2024, with the Institute for Supply Management’s (ISM) non-manufacturing PMI rising to 53.4 from 50.5 in December, exceeding expectations of 52.0. This growth was driven by stronger new orders and employment, though input prices surged to an 11-month high of 64.0, reflecting persistent cost pressures. The report reinforced expectations of sustained economic momentum, reducing the likelihood of a Federal Reserve rate cut in March. The Fed has maintained its policy rate in the 5.25%–5.50% range since July 2023, following cumulative hikes of 525 basis points since March 2022.

Globally, services activity showed mixed trends. India’s services PMI hit a six-month high of 61.8 in January, while the U.S. services PMI rose to 52.5. The eurozone’s services PMI reached the expansion threshold of 50.0, a seven-month high, and China’s official services PMI edged into growth at 50.1 after months of contraction. However, manufacturing sectors lagged, with China’s manufacturing PMI remaining in contraction at 49.2 and the eurozone’s at 46.1.

Inflationary pressures varied. U.S. core CPI remained steady at 3.9% annualized, while the eurozone’s headline inflation eased to 2.8% year-over-year. China faced deflation, with consumer prices falling 0.8% in January. Supply chain disruptions, including Red Sea shipping delays and winter storm impacts, added uncertainty to global trade. Unemployment trends were generally stable or declining, with the U.S. nonfarm payrolls surging by 353,000 in January.

The divergent performance of services and manufacturing underscores ongoing structural shifts in global economies, with services-driven growth tempering broader inflation concerns.