US Services Sector Accelerates in February

The US services sector saw growth pick up in February, with a sharp increase in activity and new orders, even as concerns about trade friction with China lingered, according to a business survey released Tuesday.

The rebound after two months of declines came despite a retail slowdown and a continued shortage of workers, the Institute for Supply Management’s monthly survey showed.

The ISM’s non-manufacturing index jumped three points to 59.7 percent from 56.7 percent in the prior month, well above the consensus estimate of economists and above the 12-month average. Anything above 50 percent indicates growth. “It was a strong rebound from prior month,” said Anthony Nieves, chair of ISM’s survey committee for the non-manufacturing sector. “It was notable to see all 18 industries have reflected growth,” he told reporters in a conference call.

It is the first time since April that every industry showed expansion in the month and only the second time since May 2006, ISM said. In the key components, the business activity index jumped five points to 64.7 percent, while new orders surged 7.5 points to 65.2 percent, according to the report, both the highest since August 2005. But the uncertainty generated by the trade dispute with China hangs over the sector, which Nieves said especially affects retailers, which saw contraction in activity.

US private sector output growth regained momentum in February, with a robust upturn in service-sector activity. The rate of employment growth accelerated sharply from the 19-month low seen in January. https://t.co/eyXxWq74Hz via @SIADailyNews

— Ross Clennett (@rossclennett) February 26, 2019

One company executive said, “We are anxiously awaiting decisions in the next couple of weeks on the fate of the proposed tariffs on China.” Another said that, while business was “steady… we are more concerned about tariffs in the short term, since there seems to be no agreement.”

But hiring continues to be a headache for firms nationwide, and the employment index fell 2.6 points to 55.2 percent. “It’s really tough right now,” Nieves said, noting that firms are beginning to see wage pressures, especially since the “prevalent practice” is to hire from competitors to fill open positions.