The headline seasonally adjusted Markit Flash U.S. Services PMI™ Business Activity Index registered 52.7 in February, down from a four month high of 56.7 in January. The latest ‘flash’ PMI reading, which is based on approximately 85% of usual monthly replies, was the lowest since last October. That said, the average index reading for 2014 to date (54.7) is broadly in line with that recorded for 2013 as a whole (54.8).
Although the latest data pointed to a slowdown in service sector output growth since January, survey respondents widely cited the negative influence of recent weather-related disruptions. Moreover, a robust increase in new business volumes and continued job hiring suggested that underlying demand remained resilient.
February data meanwhile indicated one of the fastest increases in backlogs of work since the survey began in late 2009, which added to the signs that weaker activity growth reflected temporary weather disruptions.
Higher levels of business activity have now been recorded for four consecutive months, though the latest rise was the weakest seen over this period. Survey respondents attributed increasing output to a further robust improvement in client demand, as highlighted by new business volumes again rising at a broadly similar pace to that seen on average in the final quarter of 2013. Weather-related disruptions led to an accumulation of unfinished work in February. Volumes of work outstanding have now increased in three of the past four months, which in turn supported job hiring during the latest survey period.
February data marked four years of continuous employment growth across the service sector, although the rate of expansion eased slightly to its slowest since March 2013. There was also a moderation in service providers’ confidence about the business outlook, with optimism easing from January’s three-year high.
Nonetheless, more than half of the survey panel (51%) anticipate an increase in business activity over the next 12 months, while only 3% forecast a reduction. Anecdotal evidence cited the launch of new projects, improving confidence about the near-term prospects for the U.S. economy, and signs of a continued upturn in client demand.
Meanwhile, input price inflation eased for the sixth time in the past seven months during February. The latest overall increase in cost burdens was the weakest since June 2013. Average prices charged by service providers also rose in February, but at the slowest rate for five months, with anecdotal evidence generally citing weaker cost pressures.
At 53.5 in February, the Markit Flash U.S. Composite PMI Output Index, which is based on original survey data from the Markit U.S. Services PMI and the Markit U.S. Manufacturing PMI, was down from 56.2 in January. The latest reading pointed to the weakest performance of the U.S. private sector economy since October 2013. That said, the index remained well above the 50.0 no-change mark and signalled a solid rate of output growth that was only slightly slower than the average for 2013 as a whole (54.8).
