US Business Activity Steady in January as Consumer Sentiment Improves

Business growth remains stable

US business activity stayed stable in January. Stronger new orders helped offset weak job growth. However, many companies still worry about rising costs linked to import tariffs.

S&P Global said its flash US Composite PMI Output Index stood at 52.8 in January. It was almost unchanged from December’s 52.7. A reading above 50 means the private sector is still expanding.

Both the services and manufacturing sectors showed little change. This suggests the economy is growing at a steady but moderate pace.

Economic growth still strong

Recent government data shows solid economic growth. The US economy expanded at a 4.4 percent annual rate in the third quarter. Consumer spending and investment in technology, including artificial intelligence, supported this growth.

The Atlanta Federal Reserve expects GDP to have grown at a 5.4 percent rate in the fourth quarter. The official report will be published on February 20.

New orders rise, but exports fall

Business demand showed mixed signals. New orders rose to 52.2 in January from 50.8 in December. This is a positive sign for future activity.

However, exports dropped to a nine-month low. Both goods and services exports declined during the month.

Business confidence and jobs remain weak

Business confidence fell slightly and is now below last year’s average. Many companies remain worried about high prices, global tensions, and government policies.

The labor market also showed little improvement. Private sector employment edged up to 50.5 from 50.3. This points to very slow job growth.

Some companies said they are struggling to find workers. Economists link this partly to tighter immigration rules, which have reduced the supply of labour.

Inflation pressures remain high

Price pressures stayed high, even though they eased a little. The index for prices charged by companies slipped to 57.2 from 57.3.

Meanwhile, input costs fell to 59.7 from 61.9. Despite this drop, costs remain elevated.

These numbers suggest inflation could stay high for longer. Many firms have absorbed some of the impact of tariffs. This has helped avoid a sharp rise in prices.

The US central bank is expected to keep interest rates unchanged next week. Policymakers want to see clearer signs on inflation and jobs before making any move.

Consumer sentiment shows slight improvement

Consumer confidence improved in January. The University of Michigan’s Consumer Sentiment Index rose to 56.4 from 52.9 in December. The improvement appeared across both major political parties. However, confidence is still more than 20 percent lower than a year ago. Many consumers still feel pressure from high prices and worry about future job prospects.

Inflation expectations ease slightly

Consumers now expect inflation to be slightly lower. One-year inflation expectations fell to 4.0 percent. This is the lowest level since January 2025. Five-year inflation expectations dipped to 3.3 percent. However, long-term expectations rose a little compared to last month. Experts say a strong recovery in confidence may take time. “With affordability pressures still high, a quick rebound in sentiment looks unlikely,” said Nationwide economist Oren Klachkin.