U.S. Services Sector Expands for Eighth Consecutive Month in February

The U.S. services sector maintained its growth momentum in February, marking the eighth consecutive month of expansion, according to the latest Services ISM® Report On Business®.

The Services PMI® rose to 53.5%, up 0.7 percentage points from January’s reading of 52.8%, indicating continued strength in the sector.

Since the economic recovery from the pandemic-induced recession began in June 2020, the services sector has expanded in 54 of the past 57 months, reaffirming its role as a key driver of economic activity.

Key Indicators Show Broad-Based Growth

The report, published by the Institute for Supply Management® (ISM®), highlighted expansion across multiple key subindexes, reflecting strong demand and economic resilience.

Business Activity Index: Slightly declined to 54.4% from January’s 54.5%, but remained in expansion for the 57th consecutive month.
New Orders Index: Increased by 0.9 percentage points to 52.2%, signaling steady demand growth.
Employment Index: Rose to 53.9%, up 1.6 percentage points from January, marking five straight months of job expansion.
Supplier Deliveries Index: Inched up to 53.4%, reflecting slower delivery times, often linked to rising demand and supply chain adjustments.

One of the most notable shifts was seen in the Backlog of Orders Index, which jumped 6.9 percentage points to 51.7%, moving into expansion territory for the first time since July 2024 and reaching its highest level since July 2023.

Pricing Pressures and Inventory Rebound

Pricing pressures intensified in February, with the Prices Index climbing to 62.6%, up 2.2 percentage points from January’s 60.4%. This marked the third straight month above 60%, a level last seen in early 2023, indicating rising costs for service providers.

The Inventories Index returned to growth, rising to 50.6% from 47.5%, while the Inventory Sentiment Index posted its 22nd consecutive month of expansion, reaching 54.7%.

Sector Resilience Despite Business Uncertainty

A total of 14 industries reported growth in February, matching January’s level. Importantly, February marked the third straight month in which all four core indices. Business Activity, New Orders, Employment, and Supplier Deliveries have remained in expansion, a trend last observed in May 2022.

Despite the positive outlook, businesses expressed concerns over potential tariff changes and federal spending cuts, which could impact future growth. While the sector continues to expand, ongoing cost pressures and regulatory uncertainties remain on the radar.

Source: Institute for Supply Management (ISM)

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