Home News Government Shutdown Aftermath: U.S. Services Sector Activity at Six-Month Low

Government Shutdown Aftermath: U.S. Services Sector Activity at Six-Month Low


The five-week shutdown of the federal government on the economy prompted the U.S. services sector activity to slow down on a 6-month low starting January as more businesses are worried about the aftermath.

According to the report released by the Institute for Supply Management (ISM) on Tuesday, there is still a stable economic growth despite the two consecutive months of moderate activity.

Following the settled agreement between President Donald Trump and the Congress to fund the government, the 35-day shutdown which started December 22 last year finally came to an end. The federal government was reopened on January 25, with Trump not winning funding for his United States-Mexico border wall.

Toronto-based BMO Capital Markets senior economist Jennifer Lee said that the setback was a frustrating non-manufacturing reading, triggered by several elements, including a temporary factor. Lee added that a retracement of the setback is anticipated this month but with the temporary factor at the forefront.

The ISM stated that the non-manufacturing activity index went down to a 56.7 reading last month, plunged by 1.3 points. It was ISM’s lowest record since July last year, and so far marked two consecutive monthly falls. A reading beyond 50 reflects a sector expansion, which corresponds to over two-thirds of the economic activity of the country.

The new orders sub-index by ISM for the services sector toppled to its lowest reading since December 2017, it fell by 5.0 points to a 57.7 reading last month. Its production gauge or business activity also plummeted sharply. A steep slump was also noted in the measure of export orders contained in the survey.

From a 56.6 reading in December, the services employment measure of the survey went up to 57.8.

The U.S. financial markets were faintly moved by the figures as traders anticipated Trump’s State of the Union Address at 9 pm Wednesday. The U.S. dollar was up against a number of currencies while yields by the U.S. Treasury dropped and Wall Street’s stocks were exchanging higher.