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After reporting a contraction in U.S. service sector activity in the previous month, the Institute for Supply Management released a report on Friday showing activity rebounded by much more than expected in the month of January.
The ISM said its services PMI jumped to 55.2 in January from a revised 49.2 in December, with a reading above 50 indicating growth. Economists had expected the index to inch up to 50.4 from the 49.6 originally reported for the previous month.
"Although responses varied by industry and company, the majority of panelists indicated that business is trending in a positive direction," said Anthony Nieves, Chair of the ISM Services Business Survey Committee.
The bigger than expected increase by the headline index was partly due to a substantial turnaround by new orders, as the new orders index spiked to 60.4 in January from 45.2 in December.
The business activity index also surged to 60.4 in January from 53.5 in December, indicating an acceleration in the pace of growth.
The report also showed the employment index crept up to 50.0 in January from 49.4 in December, suggesting employment was unchanged after contracting in the previous month.
"Some companies still find it difficult to fill open positions, while others are facilitating staff reductions," said Nieves.
A separate report released by the Labor Department on Friday said employment in the service-providing sector spiked by 397,000 jobs in January after jumping by 226,000 jobs in December.
Meanwhile, the ISM said the prices index edged down to 67.8 in January from 68.1 in December, indicating a modest slowdown in the pace of price growth.
The ISM released a separate report on Wednesday showing activity in the U.S. manufacturing sector contracted for the third consecutive month in January.
The manufacturing PMI dipped to 47.4 in January from 48.4 in December, with a reading below 50 indicating a contraction. Economists had expected the index to edge down to 48.0.
