US ISM Services PMI climbed to 53.5 in February, up from 52.8 in January and exceeding expectations of 53.0. The data signaled continued expansion in the services sector, with growth seen across key subcomponents.
Business activity showed only a marginal decline from 54.5 to 54.4. New orders ticked up from 51.3 to 52.2, while employment rose from 52.3 to 53.9. Price pressures remain a concern, as the prices subindex jumped from 60.4 to 62.6, reinforcing worries about inflation persistence.
While the services sector continues to grow, ISM noted that businesses remain anxious over the impact of tariffs, while some respondents cited federal budget reductions as negatively affecting their outlook.
Despite these uncertainties, ISM pointed out that February marked the third consecutive month where all four major subindexes—business activity, new orders, employment, and supplier deliveries—remained in expansion territory, a first since May 2022.
The report also indicated that the current level of services activity corresponds to a 1.6% increase in annualized GDP.
