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Bad Weather Slows US Service Economy in February: Markit

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Bad Weather Slows US Service Economy in February: Markit

The US service economy fell to the lowest level in four months, as weather-related disruptions caused a rise in unfinished work.

Markit Group’s gauge of US service activity declined from 56.7 to 52.7. A reading above 50.0 signifies expansion in the non-manufacturing sectors, whereas a reading below that level is a sign of contraction.

Output in the services sector weakened broadly this month, as weather-related disruptions continued to weigh on business growth. Bad weather conditions, a hallmark of the current winter season in the US, caused backlogs of work to rise at one of the fastest rates since the survey began in 2009.

Although bad weather continued to exert negative influence, it didn’t disrupt the underlying strength of the service economy, which continued to recover at a strong pace. A sharp rise in new business volumes and continued job hiring suggest the US economy is still on the right track. February marked the fourth consecutive year of positive employment growth in the service economy, Markit data showed.

The service economy was less resilient that the manufacturing sector this month. Markit’s gauge of manufacturing activity rose sharply in February, with factories reporting the biggest rise in business activity in nearly four years.

“The unusually severe winter weather undoubtedly looks to have taken its toll on the economy in the first quarter,” wrote Markit chief economist Chris Williamson. “The ongoing mood of optimism reflects growth of new business remaining reassuringly strong. The resulting rise in backlogs of work should help drive an upturn in activity in March, and suggests that the underlying health of the economy remains sound in the face of the onslaught from the weather.”

The weather-induced slowdown could see the economy expand just 1.6 percent in the first quarter, half the rate of the final three months of last year, according to Williamson. The Commerce Department will provide a second estimate of fourth quarter GDP growth Friday.

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