February data pointed to a robust and accelerated increase in U.S. service sector business activity. At 57.0, up from 54.2 in January, the seasonally adjusted Markit Flash U.S. Services PMI™ Business Activity Index highlighted the fastest rate of output growth since last October. Moreover, the latest reading was broadly in line with the average seen during 2014 as a whole (57.1).
Higher levels of service sector business activity were driven by a strong rebound in new work in February. Growth of new business picked up from January’s survey-record low and was the sharpest for four months. Reports from survey respondents suggested that improving underlying economic conditions had boosted client demand in February. While some firms noted disruptions as a result of adverse weather conditions in the Northeast, there were also reports from companies based on the West Coast that unusually mild weather had supported new business gains during the latest survey period.
Increased overall volumes of new work contributed to an accumulation of backlogs across the U.S. service sector for the seventh successive month in February. The latest rise in outstanding business was the fastest for three months.
Meanwhile, payroll numbers picked up further at service providers in February. The latest increase in employment was the fastest since November 2014. Moreover, service sector companies remain upbeat about their prospects for activity growth over the year-ahead, although the degree of optimism eased to a four-month low in February.
Service providers indicated a modest increase in average cost burdens during February, with the rate of inflation only slightly above the 50-month low seen in January. Output charges also rose only slightly across the service economy in February.
The seasonally adjusted Markit Flash U.S. Composite PMI Output Index registered 56.8 in February, up from 54.4 in January and the highest reading since October 2014. Faster growth of U.S. private sector business activity was driven by the strongest rise in new work for four months. Overall payroll numbers increased at the sharpest pace since last November. Meanwhile, input cost inflation picked up only marginally from January’s survey-record low.