The expansion momentum of the US service industry is stable, while overseas orders are shrinking and cost pressures are rising.

The US service industry recorded its strongest growth momentum since 2024 for the second consecutive month in January, indicating that the rebound in business activity is driving the largest component of the economy to continue expanding. Data released by the Institute for Supply Management (ISM) on Wednesday showed that the service sector index remained unchanged at 53.8 in January, staying at its highest level since October 2024 for the second consecutive month. A reading above 50 indicates continued expansion in the service industry. However, the internal structure of the report presents more complex signals. While business activity has noticeably accelerated, providing support for the overall index, there has been a cooling in order growth and employment expansion has almost come to a standstill, reflecting that the recovery in the service industry is not balanced across all areas. Specifically, the ISM Business Activity Index rose significantly by over 2 points to 57.4, reaching a new high since October 2024, indicating a marked increase in the pace of business operations, in line with the trend in manufacturing output indicators. In contrast, the New Orders Index fell from its previous year-high to 53.1, showing a slowdown in demand growth. Of particular concern is the significant weakening of overseas customer demand, with the Export Orders Index contracting at the fastest pace since March 2023, suggesting that external markets are weakening in their support of the US service industry. At the same time, inflation pressures are rising in the service sector. The report shows that the Prices Paid Index for services and materials increased to 66.6, reaching a three-month high. Market analysts point out that changes in the Trump administration's trade policies are prompting some businesses to readjust their supply chain layout, which could further push up costs. On the supply side, the Supplier Delivery Index rose to its highest level since October 2024, indicating lengthening delivery cycles, increased delivery delays, or potentially affecting operational efficiency for businesses. The Inventory Index showed a significant decrease. The service sector inventory index plummeted by over 9 points to 45.1, marking the largest inventory contraction since mid-2024. The latest data indicates that inventory levels for consumer-facing service providers have significantly decreased after a strong performance during the holiday shopping season. Overall, the US service industry maintained its expansion momentum at the beginning of the year, but factors such as slowing orders, declining export demand, and rising cost pressures suggest that future growth still faces some uncertainty.