A costruction firm said, ‘business has slowed well below expectations’ following the five-week government shutdown (KEVORK DJANSEZIAN)

Washington (AFP) – The US services sector saw growth slow in January, with companies pointing to some impact from the government shutdown, according to a business survey released Tuesday.

It was the second consecutive month of slowing in the services sector, the main driver of the world’s largest economy, which saw seven industries contract last month, notably retailers, Institute for Supply Management’s monthly survey showed.

The ISM’s non-manufacturing index fell 1.3 points to 56.7, slightly below expectations, after a more than two-point decline in December. 

Even with the decline to the lowest point since July 2018, and below the average of the past 12 months, it was the 108th month of uninterrupted growth in the sector. Anything above 50 percent indicates growth.

“The non-manufacturing sector’s growth rate cooled off in January,” Anthony Nieves, chair of ISM’s survey committee for the non-manufacturing sector, said in a statement. 

“Respondents are concerned about the impacts of the government shutdown but remain mostly optimistic about overall business conditions.”

The ISM survey showed new orders fell sharply, dropping five points to 62.7, and new exports orders plunged nine points to 59.5.

However, employment rose, which Ian Shepherdson of Pantheon Macroeconomics said was the first in four months and the highlight of the report.

While the result was disappointing, “We hope for a rebound next time,” he said in a research note.

Survey respondents express concern about the US government shutdown, which ended after five weeks, and the impact of punitive US tariffs on prices.

“Business has slowed well below expectations as our customers deal with the effects of economic situations exacerbated by the government shutdown,” a construction company said.

And a public administration firm said, “Economic activity remains strong locally; however, there is concern that this may change quickly due to uncertainty and reports of slowing economic indicators.”

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