US Services Expand at Faster Pace on Robust Employment Growth
US service providers expanded in February at a faster pace as resilient demand helped drive a measure of employment to a more than three-year high.
The Institute for Supply Management’s gauge of services advanced to 53.5 from 52.8 a month earlier, according to data released Wednesday. Readings above 50 signal growth, and the latest figure exceeded economists’ expectations.
The group’s index of services employment climbed for a third month to 53.9, the highest since December 2021. A measure of costs paid for materials and services increased to one of the firmest readings since early 2023, underscoring the challenge Federal Reserve policymakers face as they look to further tamp down inflationary pressures.
While the ISM survey suggests service providers are signaling steady business activity, recent monthly data from the government indicate the economy was off to a rough start at the turn of the year. The Atlanta Fed’s GDPNow forecast currently projects gross domestic product will decline in the first quarter.
A spike in imports accounts for a large share of the setback, reflecting a scramble by companies to secure goods from overseas ahead of tariffs from the Trump administration. Business investment, consumer spending and homebuilding were also notably weak in January.
The ISM survey, however, showed orders growth accelerated in February, while another gauge showed order backlogs expanded by the most since July 2023. Further, the index of business activity, which parallels the group’s factory output gauge, remained elevated.
Those developments help explain the stronger ISM employment gauge. While the figures don’t detail the degree of employment growth during the month, the index may provide some reassurance that the government’s jobs report later this week will show a resilient labor market.
Source : Bloomberg
