Activity in the U.S. service sector expanded at a faster than expected rate in the month of January, according to a report released by the Institute for Supply Management on Friday, with the index of activity in the sector rising to an eleven-month high.
The ISM said its non-manufacturing index rose to 56.8 in January from a revised 53.0 in December, with a reading above 50 indicating growth in the service sector. Economists had expected the index to edge up to 53.3 from the 52.6 originally reported for the previous month.
With the bigger than expected increase, the index rose to its highest level since coming in at a reading of 59.0 in February of 2011.
Anthony Nieves, chair of the ISM Non-Manufacturing Business Survey Committee, said, "Respondents' comments are mostly positive about business conditions. There is concern about cost pressures and the sustainability of the recent spike in activity."
The report showed that the business activity index jumped to 59.5 in January from 55.9 in December, while the new orders index surged up to 59.4 from 54.6.
Pointing to a turnaround in employment in the service sector, the employment index also shot up to 57.4 in January from 49.8 in the previous month.
On the inflation front, the prices index edged up to 63.5 in January from 62.0 in December, suggesting an acceleration in the pace of price growth.
Peter Boockvar, equity strategist at Miller Tabak, said, "Bottom line, the improving U.S. economic data continues notwithstanding what is going on in Europe and the slowdown in Asia."
"As the ISM stated though, sustainability of this recovery still remains unanswered because of the issues overseas," he added.
Wednesday morning, the ISM released a separate report showing a continued expansion in the manufacturing sector in the month of January, although the index of activity in the sector rose by less than anticipated.
The ISM said its purchasing managers index rose to 54.1 in January from a revised 53.1 in December, with a reading above 50 indicating growth in the manufacturing sector.
Economists had been expecting the index to increase to a reading of 54.5 from the 53.9 originally reported for the previous month.
While the index came in below economist estimates, it still indicated the 30th consecutive month of expansion in the manufacturing sector and was at its highest level since reaching 55.8 in June of 2011.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.