The Institute for Supply Management (ISM) reported on Wednesday that its non-manufacturing index (NMI) came in at 58.7 in January 2021, which was 1.0 percentage point higher than the revised December 2020 reading of 57.7 percent (originally 57.2). The reading pointed to the growth in the services sector for the eighth straight month and at the fastest pace since February 2019.

Economists forecast the index to decrease to 56.8 last month. A reading above 50 signals expansion, while a reading below 50 indicates contraction.

Of the 18 manufacturing industries, 14 reported gains last month, the ISM said, adding that respondents' comments were more optimistic about business conditions and the economy even though various local- and state-level COVID-19 restrictions continue to negatively impact companies and industries.

According to the report, the ISM’s the Employment Index climbed 6.5 percentage points to 55.2 percent from the December reading and the New Orders gauge increased 3.2 percentage points to 61.8 percent. Meanwhile, the non-manufacturing Business Activity measure fell 0.6 percentage point to 59.9 percent from December’s figure, the Supplier Deliveries Index dropped 5.0 percentage points to 57.8 percent, and the Inventories index plunged 9.0 percentage points to 49.2 percent. Elsewhere, the Prices Index edged up 0.2 percentage points to 64.2, indicating that prices increased in January, and at a slower rate.

Commenting on the data, the Chair of the ISM Non-Manufacturing Business Survey Committee, Anthony Nieves, noted, “The past relationship between the Services PMI and the overall economy indicates that the Services PM for January (58.7 percent) corresponds to a 3.4 -percent increase in real gross domestic product (GDP) on an annualized basis.”