WASHINGTON (Reuters) – A measure of U.S. service sector activity fell to an 11-month low in January as a resurgence in COVID-19 infections hurt demand at contact businesses. raised and kept workers at home.
The Institute for Supply Management said Thursday its non-manufacturing activity index fell to 59.9 last month, the lowest level since February 2021, from 62.3 in December.
A value above 50 indicates growth in the service sector, which accounts for more than two-thirds of US economic activity. Economists polled by Reuters had expected the index to fall to 59.5.
Slowing service industry activity was the latest indication that the economy lost considerable momentum in January as coronovarius infections, driven by the Omicron variant, hit the country.
The ISM reported this week that its measure of national manufacturing activity fell to a 14-month low in January. The ADP’s National Jobs Report released on Wednesday showed private sector payrolls fell last month for the first time since December 2020.
The economy grew at an annualized rate of 6.9% in the fourth quarter, helping push overall growth in 2021 to 5.7%, the strongest performance since 1984. Growth estimates for the first quarter are mostly below a rate of 2.0%.
But the business disruption is likely over, with a rebound in activity expected as the Omicron wave subsides.
The United States is reporting an average of 433,601 new COVID-19 infections per day, down sharply from more than 700,000 in mid-January, according to a Reuters analysis of official data.
The ISM measure of new orders received by service businesses fell to 61.7, also the lowest in 11 months, from 62.1 in December. Its service industry employment indicator fell to a seven-month low of 52.3 from 54.7 in December.
The drop, which likely reflects absenteeism as well as the shortage of workers, suggests job growth slowed in January.
According to a Reuters survey of economists, the government is expected to report on Friday that nonfarm payrolls rose by 150,000 jobs last month after rising by 199,000 in December. Estimates range from a decline of 400,000 to a gain of 385,000.
There were 10.9 million job openings at the end of December.
As hiring in the services sector slowed, the improvement in supply chains seen in December came to a partial halt. As pending orders rose at a slower pace, the survey’s measure of supplier deliveries rose to a reading of 65.7 from December’s 63.9. A reading above 50% indicates slower deliveries.
This meant that services inflation remained high. The ISM measure of prices paid by service industries slipped to a still high 82.3 from 83.9 in December.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)
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