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US Service Economy Hits a Rough Patch: Markit

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US Service Economy Hits a Rough Patch: Markit

The US service economy accelerated further in April, although the pace of business expansion and employment growth eased considerably.

Markit Group’s gauge of US services fell from 55.3 to 54.2 in April. A broad consensus of market analysts called for 56. A reading above 50 signifies expansion in service activity, whereas a reading below that level indicates contraction.

A continued increase in new work kept business activity elevated in April, although the pace of new business growth was only slightly faster than March’s 18-month low. Subdued new business activity weighed heavily on hiring, Markit data showed. Employment rose at the slowest pace in nearly two years, a sign the US labour market may need more time to recover from the winter freeze. Official employment data last month showed US private employers added 192,000 payrolls in March, following a revised gain of 197,000 in February.

The Labor Department will report on April nonfarm payrolls at the end of next week.

“In the services sector, there are worrying signs for future momentum,” wrote Markit chief economist Chris Williamson in a press release. “Levels of outstanding business fell at the fastest rate since last August, and firms’ optimism about the year ahead also waned.”

Combined with manufacturing PMI, the services report points to subdued hiring this month. Williamson added nonfarm payroll growth could fall to 100,000 in April. Annualized GDP growth is forecast to be at 2 percent.

“These data challenge the view among many, including some key policymakers, that the recent deterioration in some of the economic data has been purely a symptom of the adverse weather at the start of the year,” Williamson added.

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