U.S. service providers indicated stronger underlying growth trends in February, with output and new business volumes both rising at the fastest rates for four months. Staff recruitment also continued to rise during the latest survey period, which service sector companies linked to increased workloads. Meanwhile, input price inflation was unchanged from January’s 50-month low, helped by downward pressure on costs from lower fuel and energy bills.
Adjusted for seasonal influences, the final Markit U.S. Services Business Activity Index registered 57.1 in February, up from 54.2 in the previous month and the highest reading since October 2014. Reports from survey respondents suggested that stronger client demand and improving economic conditions had boosted business activity in February. Firms noted that bad weather in the northeast had caused disruptions early in February, but a number of respondents also suggested that there had been a catch-up effect towards the end of the month.
The final seasonally adjusted Markit U.S. Composite PMI™ Output Index (covering manufacturing and services) registered 57.2 in February, up from 54.4 in January and the highest reading since October 2014. Faster private sector output growth reflected stronger contributions from both manufacturing (57.3) and services (57.1) in February.
February data indicated that new business growth rebounded strongly from the survey-record low seen at the start of 2015. Higher levels of incoming new work were linked to better economic conditions, the launch of new projects and successful marketing initiatives. Meanwhile, outstanding business volumes rose for the seventh successive month in February, with the rate of backlog accumulation reaching its fastest since last November.
Increased levels of new work and subsequent pressures on operating capacity led to a solid expansion of service sector payroll numbers during February. Moreover, the latest upturn in employment marked five years of continuous job creation across the U.S. service economy. Positive staff recruitment patterns were helped by strong confidence towards the business outlook, according to survey respondents in February.
Input prices increased marginally during February, with the rate of inflation unchanged from January’s recent low. Meanwhile, average prices charged rose for the twentieth consecutive month, but the rate of inflation picked up only slightly since the start of 2015 and remained modest.