US Services Activity Unexpectedly Slows: S&P Global

The S&P Global US Services PMI fell to 52.3 in February of 2026 from 52.7 in the previous month, missing expectations that it would increase to 53 to reflect the softest expansion in the US services activity in 10 months, according to a flash estimate. New work flows in the sector was sustained at a softer pace, pressured by a drop in export orders. The sluggish momentum in client demand drove firms to slow their marginal hiring rate. In the meantime, selling charges for services providers rose to a seven-month high to match their highest level in over three years, with input cost inflation remaining elevated but below recent peaks. Looking forward, companies remained optimistic that the end of a harsh winter and lower interest rates and tax breaks would support business activity in the upcoming year.

The S&P Global US Services PMI rose to 52.7 in January of 2026 from 52.5 in the previous month, revised upwards from the flash estimate of 52.5 and loosely aligned with the initial market expectations of 52.8. The period marked nearly three years of monthly growth in the US services output, outperforming those from other major economies. New sales rose at a sharper pace at the start of the year, as robust activity in the domestic market was enough to offset softness for foreign clients amid the tariffs passed by the US and their retaliatory measures. The steady capacity demand drove employment numbers to increase marginally. Meanwhile, increases in payrolls and cost pressures from tariffs lifted input inflation, although selling charges increased to a lesser extent. Looking forward, business confidence for the upcoming year fell to its lowest in three months.

The S&P Global US Services PMI was at 52.5 in January of 2026, remaining unchanged from the eight-month low in the previous month and slightly below market expectations of 52.8. Still, the period marked almost three years of consecutive monthly growth, outperforming other major economies. Inflows of new business moderated slightly from the previous month, with exports falling at the sharpest rate since 2022. The softer demand for capacity drove employment growth to ease, magnifying the impact of higher labor costs in the sector. Still, input cost inflation moderated despite remaining elevated, feeding into marginally lower output charge inflation. Looking forward, business confidence for the upcoming year fell to its lowest in three months.