The US service sector contracted this month, according to survey figures released today.
Markit's flash services purchasing managers' index (PMI) – compiled from a survey of businesses – dropped to a score of 49.8. Because the score is below 50 it implies the service sector contracted this month. It is the PMI's lowest score for 28 months. Flash results are early estimates, with the final figure due for release early next month.
Reports from survey respondents suggested that softer underlying new order growth and uncertainty about the economic outlook had weighed on business activity in February. At the same time, disruptions related to heavy snowfall on the east coast were also a factor weighing on the headline index during the latest survey period.
The degree of confidence about the year ahead was at its lowest for five-and-a-half-years, according to the survey.
“The PMI survey data show a significant risk of the US economy falling into contraction in the first quarter. The flash PMI for February shows business activity stagnating as growth slowed for a third successive month. Slumping business confidence and an increased downturn in order book backlogs suggest there’s worse to come," said Markit chief economist Chris Williamson.
The survey figure does not bode well for the country's growth prospects, with services making up 80 per cent of the economy. Official figures recently revealed the economy slowed sharply in final three months of 2015 to an annualised rate of 0.7 per cent.