U.S. service companies grew in January at the slowest pace in six months, amid concern over the impact of the partial government shutdown on the economy.
The Institute for Supply Management, an association of purchasing managers, reported Tuesday that its service index fell to 56.7 percent last month, down from 58 percent in December. The January reading was the lowest since July 2018.
Any reading above 50 signals growth. So even with the January decline, the index shows that service industries, where most Americans work, has been expanding for 108 consecutive months. The ISM notes that executives of service companies remain optimistic about overall business conditions.
The fall in the services index was led by a big drop in the component that tracks new orders. While the key business-activity index marked a much smaller decline than the new-orders gauge, the employment and prices indexes actually rose in January. Last Friday’s jobs report from the government showed that the economy added a sizable 304,000 jobs during the month.
The purchasing managers’ survey showed that 11 service industries reported growth in January. Seven reported declines, led by retail trade, educational services, information, and agriculture and forestry.
Some survey respondents said they were focusing on holding out through the 35-day government shutdown, the longest federal closure in U.S. history, which ended Jan. 25. Others said they were working to address the impact on their business of the Trump administration’s stiff tariffs on Chinese imports.
“It’s a wait-and-see confidence situation,” said Anthony Nieves, the chair of ISM’s non-manufacturing business survey committee.
At loggerheads with Democratic leaders and under pressure from conservative backers, President Donald Trump refused to sign a government funding bill that did not include money for his long-sought wall on the U.S.-Mexico border. He has insisted on $5.7 billion in funding.
As the shutdown dragged on with hundreds of thousands of Americans missing paychecks, Trump ultimately agreed to reopen the government for three weeks to allow negotiations on border security to continue.
With the new Feb. 15 funding deadline looming, Trump has hinted at the possibility of declaring a national emergency to secure wall funding if Congress doesn’t act. That has amplified concern over a possible second shutdown.
“If there’s another shutdown, that will definitely affect the psyche” of companies’ purchasing, Nieves said in a telephone interview.
Some economists view the decline in services activity as signaling that the economy will slow this year after a strong performance in 2018.
An ISM report last week showed that U.S. factories grew at a slightly faster pace in January than in December — when manufacturing marked the slowest pace in more than two years amid concern over the impact of Trump’s trade policies.