The numbers: The large service side of the U.S. economy, in which most people work, cooled off in January — as did inflation — but cold weather at the start of the year had something to do with it.

The service index compiled by the Institute for Supply Management slid to 52.8% in January from 54% in December. Most businesses supply services, and more than 80% of Americans workers are employed by those businesses.

“Poor weather conditions were highlighted by many respondents as impacting business levels and production,” said Steve Miller, chair of the survey.

The best news in the report was some easing in inflation, although price pressures were still a problem.

The prices-paid index, a measure of inflation, fell four points to 60.4%. The price gauge had climbed to a nearly two-year high at the end of 2024, sparking worries about a rebound in inflation.

Business leaders said they were worried about potential Trump tariffs, but none indicated that the threat hurt their businesses in January.

Trump delayed tariffs on Mexico and Canada for 30 days to allow for further negotiations, but the White House proceeded with its plan to put more tariffs on China.

Economists polled by the Wall Street Journal had forecast a reading of 54.3% in the overall ISM index. Still, any number above 50% signals the economy is growing.

Key details:

  • The new-orders index dropped 3.1 points to 51.3%.
  • The employment barometer rose 1 point to 52.3%, to mark the highest level since the summer of 2023.

Big picture: The large service side of the economy has powered U.S. growth for the past few years and is primed to do so again in 2025.