US’ service sector buried under the east coast storm

By Carlos Torres

Services, the biggest part of the US economy, shrank this month for the first time in more than two years, hurt by a late-January snowstorm that blanketed the East Coast and a dearth of orders.

The Markit Economics preliminary purchasing managers’ services index for February slumped to 49.8, the lowest reading since the partial government shutdown in October 2013, from 53.2 the prior month, a report from the London-based group showed Wednesday. It was the second-weakest reading in data going back to October 2009. Readings lower than 50 signal contraction.

Winter storm Jonas paralysed much of the Northeast at the end of last month, and disrupted businesses well into February.

Additionally, the turmoil in the financial markets, concern about slowing global growth, an uncertain presi dential election and the possibility of further Federal Reserve interest-rate increases all weighed on service providers, Chris Williamson, Markit’s chief economist, said in a statement.

"Any bounce-back from the weather may therefore prove to be only a temporary improvement in a steady downward trend in business conditions," Williamson wrote. "Slumping business confidence and an increased downturn in order backlogs suggest there’s worse to come.

The index raised concern that the slowdown in US economic growth was spreading beyond manufacturing. Markit’s data showed new orders cooled so far this month, leading to the biggest reduction in backlogs since April 2014.

The group’s measure of the outlook over the next 12 months was the weakest since August 2010. Conversely, the employment gauge continued to signal hiring remained strong.