US: Despite the rebound, the breadth of services expansion has still slowed – Wells Fargo

The ISM Service PMI released on Friday showed the index rose back above 50, into expansion territory. Analysts at Wells Fargo, point out that after just a single month under 50, the services ISM shot back up into expansion. However, they warn the breadth of services expansion has still slowed.

Key quotes:

“The slowdown in services activity to end last year now looks more like a blip rather than the start of a lasting slowdown in the sector. That's at least according to the latest ISM services release, which revealed the index advanced 6.0 points to 55.2 after a temporary drop below 50 in December.”

“While we find it easy to talk away some of the weakness in this report, month-to-month movements in the ISM can be volatile and the breadth of expansion has eased.”

“Most components of the ISM improved, with the measure of business activity up 6.9 points to 60.4 and new orders matching that index level leaping 15.2 points after registering contraction in December. New orders now match the highest level registered over the past 12 months, an indication that activity continues to hold up in the services sector.”

“The easing of supply problems is also somewhat benefiting price pressure. At 67.8 the prices paid index remains firmly in expansion, but it has declined the past four consecutive months.”