MNI INTERVIEW: US Services Prices Trending Upward-ISM's Miller
MNI (WASHINGTON) - U.S. service costs appear to be on an upward trend as growth is slowing a touch, regardless of the potential effects from Donald Trump's incoming policy changes, ISM Services survey chief Steve Miller told MNI Wednesday.
The price index in ISM's January report retraced its December surge and dropped 4.0ppts to 60.4 but the underlying trend is upward, Miller noted. January's headline ISM services index also eased more than expected to 52.8.
"Prices seem to be sticky and this January was the weakest January since 2010," Miller said in an interview. The increase in prices over the last several months "looks like a generalized trend, looks like it's creeping up, it's now above 60 for the second consecutive month, and the [Trump] administration is potentially taking some actions which will drive further inflation. If money's available and it's more freely available, they'll just take inflation up again."
The composition of the ISM services report was mixed, as business activity fell -3.5ppts to 54.5, new orders eased -3.1ppts to 51.3, but the employment index increased 1.0ppt to 52.3. There were 11 commodities reported up in price, with 3 reported down in price, and 4 reported in short supply.
FLAT TO MODERATE GROWTH
"The overall commentary within the services sector is about a weaker expansion and some commentary around labor being easier to hire," Miller said. Survey respondents had no commentary about the Federal Reserve's path of interest rates. (See: MNI INTERVIEW: Fed Rates Likely On Hold Through 2025-Croushore)
Many respondents highlighted that poor weather impacted business and said potential tariff increases remain a concern. The supplier deliveries index increased half a point to 53.0 in January and aside from the October spike caused by the ports strike, it was the highest since 2022.
The labor market appears to be growing at a moderate pace, Miller said. "Everything to me on the employment side seemed consistent. It's continuing to expand, not a huge number, but a very moderate expansion."
The new orders subindex slumped 3.1ppts to 51.3 in January but survey respondents suggest the underlying trend of demand is upward, Miller said.
"I think that pops back up again next month," he said. "The general commentary is we're meeting expectations or orders and expected customer demand is still solid with an expectation of future contracts."