Surveys Show Robust Growth in Services Sector

The services side of the U.S. economy expanded at a robust pace in February, a pair of surveys of business executives showed Tuesday.

The Institute for Supply Management said its survey of purchasing managers indicated that economic activity expanded for a fourteenth consecutive month. The ISM Purchasing Managers Index (PMI) for the services sector edged down to 52.6 from 53.4, slightly lower than the 53.0 expected.

The key measures of services sector demand moved higher. The new orders index rose 1.1 points to 56.1. The business activity index climbed 1.4 percentage points to 57.2.

Scores above 50 on the ISM indexes indicate expansion while scores below indicate contraction compared with the previous month.

The employment measure fell for the second time in three months with a reading of 48 percent, a 2.5-percentage point decrease from the January reading. This may foreshadow weakness in the February jobs numbers that the government will report on Friday.

A similar survey conducted by S&P Global also showed expansion. The S&P Global PMI moved up from 51.3 to 52.3 for the month. Output and new orders were up, although the pace of growth slowed.

Like the ISM report, S&P Global’s showed employment falling.

“A further robust expansion of service sector activity in February follows news of faster manufacturing output growth. The goods and services producing sectors are collectively reporting the sharpest growth since last June, hinting at a further quarter of solid GDP growth,” S&P’s Chris Williamson said in a statement.

Both reports showed inflationary pressures from business costs easing. But the S&P Global survey also showed that selling prices rose at a faster rate.

“A concern is that alongside this faster growth, the survey has seen price pressures revive. Although average prices are still rising at one of the slowest rates seen over the past four years, the rate of inflation picked up for goods and services alike in February to hint at some broad-based firming of price pressures that could worry policymakers about cutting interest rates too early,” Williamson said.

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