US services sector continues to grow at healthy pace
The US services sector expanded at a healthy pace in February, showing resilience in the first quarter of this year.
According to data from the Institute for Supply Management on Wednesday, the non-manufacturing (services sector) index rose to 56.9 in February, up from 56.7 in January and beating expectations for a 56.5.
The services sector, which accounts for more than two-thirds of US GDP, continues to grow with the index comfortably above the 50 level, which is the divide between expansion and contraction – a reading above 50 indicates expansion in the sector, while readings below 50 indicate contraction.
That said, business activity fell to 59.4 from the previous reading of 61.5 and new orders fell to 56.7 from the previous reading of 59.5, although they remained consistent with a solid pace of expansion.
Encouragingly, the employment index rose sharply to 56.4 from the previous reading of 51.6, returning to its highs in the third quarter of 2014. “This was at odds with the slowing in service sector employment growth reported in this morning’s ADP employment report for February,” noted Barclays. Wednesday ADP report showed private service providers added 212,000 new jobs in January.
Barclays said new export orders also accelerated to 53 from 52.5, suggesting that domestic orders were the main reason for slower growth in total orders. “The February non-manufacturing ISM suggests continued strong momentum in service sector activity and employment in the first quarter,” added Barclays.