US Services Sector Hits 3.5-Year High
The U.S. services sector expanded in February at its fastest pace since late 2022. The surge was driven by strong consumer demand and business activity, suggesting the broader economy remains resilient despite headwinds in manufacturing and global trade uncertainty.
The February ISM® Services PMI® registered 56.1 percent, a 2.3 percentage point increase from January's 53.8 percent. This marks the 20th consecutive month of growth for the sector and the highest reading since July 2022. The overall economy has now seen expansion for 69 straight months. Four key sub-indexes all showed expansion for the third month in a row. The New Orders Index jumped to 58.6, its sharpest rise in 17 months, while the Business Activity subindex rose to 59.9, its strongest reading since September 2024. This suggests a broad-based and accelerating demand for services. The employment index also expanded for the third consecutive month, accelerating to its strongest level in a year (51.8 vs 50.3 in January). This indicates that services companies are hiring at a faster pace to keep up with the increased business activity and new orders. Fourteen of the services industries tracked by ISM reported growth in February. These included Mining, Information, Real Estate, and Accommodation & Food Services. Only three sectors, including Retail Trade and Transportation & Warehousing, reported a contraction. A significant driver of the positive report was a 12.2 percentage point surge in the New Export Orders Index, which hit 57.2. This indicates a strengthening of demand for U.S. services from abroad, a positive sign amid global economic uncertainties. While activity surged, price pressures showed signs of moderating. The Prices Index fell to 63.0 from 66.6 in January, its lowest level since March 2025. However, the index has remained above 60 for 15 straight months, indicating that input costs for service providers continue to rise.
