The numbers: An ISM barometer of business conditions at companies such as restaurants and hotels rebounded to 55.2% in January after falling into contraction of 49.6 in the prior month.
Economists polled by the Wall Street Journal had expected the index to rise to 50.6%.
Numbers over 50% indicate expansion in the economy.
Key details: New orders jumped to 60.4 in January, which was 15.2 percentage points above the December reading. Business activity rose 6.9 percentage points to 60.4.
Ten of the 18 broad industry groups reported growth in January.
The price index was down 0.3 percentage point to 67.8. Employment was unchanged for the month.
Big picture: The improvement in the service sector adds to the sense that the economy is on firmer footing at the start of 2023 than many feared. It also fits with the strong January job report.
What ISM said: Survey respondents “indicated that capacity and logistics performance continue to improve. Although responses varied by industry and company, the majority of panelists indicated that business is trending in a positive direction,” said Anthony Nieves, chair of the ISM services business survey committee.
Market reaction: Stocks
opened lower on Friday after the strong job report while the 10-year Treasury note
jumped 14 basis points 3.54%.