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U.S. service sector rebounds in January - ISM survey

FILE PHOTO: A barista makes coffee for a customer in Houston

WASHINGTON (Reuters) - U.S. services industry activity rebounded strongly in January, with new orders recovering and prices paid by businesses for materials continuing to rise at a moderate pace, hopeful signs for the economy as it braces for a possible recession this year.

The Institute for Supply Management (ISM) said on Friday its non-manufacturing PMI increased to 55.2 last month. The index dropped to 49.2 in December, falling the below the 50 level, which signals contraction, for the first time since May 2020.

Economists polled by Reuters had forecast the non-manufacturing PMI rising to 50.4.

The services sector, which accounts for more than two-thirds of U.S. economic activity, is benefiting from consumers switching spending from goods. Demand for goods, which are typically bought on credit, has been undercut by the Federal Reserve's fastest interest rate hiking cycle the 1980s.

The ISM said on Wednesday that its manufacturing PMI contracted for a third straight month in January.

The ISM survey's gauge of new orders received by services businesses increased to 60.4 in January from 45.2 in December.

A measure of prices paid by services industries for inputs dropped to 67.8 from 68.1 in December as supply bottlenecks continued to ease.

The survey's measure of services industry supplier deliveries rose to 50.0 from 48.5. A reading above 50 indicates slower deliveries. Its measure of services industry employment rebounded to 50.0 from 49.4 in December.

(Reporting By Lucia Mutikani; Editing by Chizu Nomiyama)