Investing.com – Business activity in the U.S. private sector declined less than forecast in January, as a strong start to the year in manufacturing helped offset the slowdown in services, according to preliminary data released on Wednesday.
In a report, market research group IHS Markit said that its composite purchasing managers’ index (PMI), covering both the manufacturing and services sectors, fell to to 53.8 in January, from the prior reading of 54.1.
Consensus had been looking for a drop to 53.5.
On the indices, a reading above 50.0 indicates expansion, below indicates contraction.
By sectors, the research group said that its flash services purchasing managers’ index (PMI) unexpectedly dropped to 53.3 in January, from the prior month’s reading of 53.7.
Analysts had expected the reading to rise to 54.5.
Services make up approximately 80% of the U.S. economy which makes the data key for interpreting growth.
Furthermore, IHS Markit said that its flash manufacturing purchasing managers’ index (PMI) increased to 55.5 in January from the prior month’s final reading of 55.1.
Economists had estimated that it would rise to just 55.2.
“January data indicated another solid expansion of U.S. private sector business activity, underpinned by the fastest rise in new work for five months,” IHS Markit highlighted.
“Business activity across the manufacturing and service sectors continued to expand, driving further job gains as companies expanded capacity,” IHS Markit chief economist Chris Williamson said in the report.
“Manufacturing is faring especially well, in part thanks to the weaker dollar, providing an important spur to the economy at the start of the year,” he added.
Williamson did comment that while the overall pace of economic growth waned to an eight-month low, forward-looking indicators suggested that the slowdown will be transitory.
Specifically, he mentioned the marked improvement in business optimism and the fact that inflows of new orders hit a five-month high.
After the report, EUR/USD was trading at 1.2393 from around 1.2389 ahead of the release of the data, GBP/USD was at 1.4215 compared to 1.4202 earlier, while USD/JPY exchanged hands at 109.21 compared to 109.36 ahead of the release.
The US dollar index, which tracks the greenback against a basket of six major rivals, traded at 89.08 compared to 89.14 before the report.
Meanwhile, U.S. stocks were trading higher after the open. The Dow 30 gained 155 points or 0.59%, the S&P 500 rose 9 points, or 0.33%, while the tech-heavy Nasdaq Composite traded up 4 points, or 0.06%.
Elsewhere, in the commodities market, gold futures traded at $1,354.90 a troy ounce, compared to $1,353.40 ahead of the data, while U.S. crude oil changed hands at $64.62, compared to $64.61 earlier.