Markit’s Services PMI confirms that cold weather did not result in significant disruptions in the overall economy. This is a strong report overall.
At 56.7 in January, up from 55.7 in December, the seasonally adjusted final Markit U.S. Services PMI™ Business Activity Index Business Activity Index posted above the neutral 50.0 value for the third successive month. Moreover, the latest reading indicated a robust pace of output expansion that was the steepest since September 2013. The index was also above the average seen since the series began over four years ago (55.5).
The headline index suggests service sector output continued to expand at a robust pace in January, with the latest increase in overall business activity the fastest for four months. Service providers added to their staffing numbers at the start of the year, which in turn contributed to a reduction in backlogs of work for the first time since October 2013. Looking ahead, service providers report the most optimistic expectations for business activity for three years.
Higher levels of services business activity reflected a further strong rise in new work. That said, the pace of new business growth eased slightly from the five-month high registered in December. Companies that reported an increase in new work generally cited improved conditions in the wider economy and an associated upturn in clients’ willingness-to-spend.
January data pointed to a solid expansion of staffing levels within the service economy. Anecdotal evidence attributed rising employment numbers to increased levels of new work and improving confidence about the business outlook. Moreover, the latest survey indicated that service providers are the most optimistic about the 12-month business outlook since January 2011. Meanwhile, a solid rate of job creation in the service economy resulted in a slight reduction in work-in-hand (but not yet completed) at the start of the year.
On the inflation front, service providers’ average cost burdens continued to increase at a robust pace in January. The latest rise in input prices was the fastest for three months. Pressures on margins from greater cost burdens contributed to an increase in output charges for the seventh successive month in January.
The seasonally adjusted final Markit U.S. Composite PMI™ Output Index (covering manufacturing and services) registered 56.2 in January, little-changed from 56.1 in December and above the 50.0 threshold for the third successive month.