Services Sector On An Upswing

Looking at the services sector, which accounts for 80 percent of U.S. gross domestic product, the ISM's January report shows that new orders expanded at a faster rate in January compared with December. Forty percent of companies surveyed said new orders were increasing, up from 36 percent in December and the highest figure in more than a year. Only 17 percent of companies said new orders declined last month.

The highest rates of growth in new orders came in legal, real estate, wholesale trade, transportation and entertainment. Construction and communications reported contractions.

Order backlogs also increased in January, continuing a nine-month trend. This increase indicates that the current pace of business operations is insufficient to meet the demand for goods and services and is a positive sign for economic growth and business expansion. Nineteen percent of companies surveyed said backlogs were increasing; 12 percent said they were declining. The highest growth rates in order backlogs came in utilities, finance/banking, construction and entertainment.

Finally, employment in the services sector expanded for the fourth consecutive month in January, although growth remains sluggish. Nevertheless, it is an indication that companies are becoming more certain that the recovery has staying power.

What's your opinion? Let me know via phone at (732) 919-1530 or e-mail at [email protected].