WASHINGTON, D.C.: US services sector activity slowed marginally in February as employment contracted for the first time in nearly two years, a closely watched private survey showed on Thursday.
The Institute for Supply Management (ISM) purchasing managers index for non-manufacturing activity dipped to 53.4 in February from 53.5 in January, the fourth straight month of weaker growth.
A PMI reading above 50 indicates growth in the vast sector, which accounts for roughly 80 percent of US economic output. The month-over-month dip was smaller than expected; the February reading was well below the 12-month average of 56.6.
For the first time since February 2014, the employment sub-index contracted, falling a sharp 2.4 points to 49.7 last month, ISM said. The decline was led by workforce reductions in the mining industry, hammered by the prolonged decline in oil and natural gas prices.
Fourteen of the 18 industries surveyed reported growth. The strongest gains were in accommodation and food services, and company management and support services.
“The majority of the respondents’ comments continue to be positive about business conditions. The respondents are projecting a slight optimism in regards to the overall economy,” said Anthony Nieves, head of the ISM non-manufacturing survey committee.
Growth in business activity and inventories accelerated, while the backlog of orders held steady. Growth in prices fell for the second month, and at a faster pace.
New orders activity rose, but at a slower rate.
“This indication of a contraction in non-manufacturing employment highlights some downside risk heading into tomorrow’s February employment report,” said Barclays analyst Jesse Hurwitz.
“On balance, modest growth in service sector activity remains the primary growth engine for the US economy,” he said.
On Thursday, a report on January factory orders from the Commerce Department showed new orders for manufactured goods rebounded, up 1.6 percent, after two straight months of declines.