U.S. Services Index Edges Slightly Lower In February

The Institute for Supply Management released a report on Friday showing a very slight slowdown in the pace of growth in U.S. service sector activity in the month of February.

The ISM said its services PMI edged down to 55.1 in February from 55.2 in January, although a reading above 50 still indicates growth in the sector. Economists had expected the index to slip to 54.5.

Andrew Hunter, Deputy Chief US Economist at Capital Economics, said the dip by the index “suggests activity continues to expand at a reasonably healthy pace, but provides further reason to doubt the idea that there has been a resurgence in growth since the start of the year.”

The modest decrease by the headline index partly reflected a decline by the business activity index, which slid to 56.3 in February from 60.4 in January.

On the other hand, the report said the new orders index rose to 62.6 in February from 60.4 in January, indicating a modest acceleration in the pace of growth.

The employment index also climbed to 54.0 in February from 50.0 in January, suggesting a return to job growth in the service sector.

Meanwhile, the ISM said the prices index fell to 65.6 in February from 67.8 in January, pointing to a slowdown in the pace of price growth.

“Overall, there isn’t much in the ISM services report to suggest the Fed needs to raise rates significantly higher than previously planned,” said Hunter.

A separate report released by the ISM on Wednesday showed U.S. manufacturing activity contracted at a slightly slower rate in the month of February.

The ISM said its manufacturing PMI inched up to 47.7 in February from 47.4 in January, but a reading below 50 still indicates a contraction. Economists had expected the index to edge up to 48.0.

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