Business activity stalls in U.S manufacturing and services sectors in February

Business activity stalls in U.S manufacturing and services sectors in February
Written by:
Michael Harris
22nd February, 03:00
Updated: 11th March, 08:56
  • Business activity stalls in U.S manufacturing and services sectors in February.
  • U.S flash manufacturing PMI drops to 50.8 in February versus 51.5 expected.
  • U.S flash services PMI drops to 49.4 in February versus 53 expected.

Markit’s purchasing managers survey highlighted on Friday that the business activity stalled in February in the U.S factories as well as in the services sector. The survey attributed the slowdown to the rising risks of the Coronavirus outbreak that is now turning into a global health emergency.

According to IHS Markit, the U.S services sector had its flash Purchasing Managers’ Index (PMI) decline to 49.4 in February that marked a record low since October 2013. Printing below 50.0, Friday’s reading suggested contraction in the U.S services sector that was last seen in 2016. The services sector accounts for 2/3rd of the U.S economy.

U.S Flash Services PMI Was Recorded At 53.4 In January

At 53.4, January’s final reading had come out broadly optimistic and hinted at continued expansion in the U.S services sector. Analysts were expecting a marginal drop to 53.0 in February. The new business sub-index of the services sector recorded at 49.7 in February that was branded its worst reading since October 2009. The figure was capped at a much higher 52.5 in January.

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Chief business economist Chris Williamson of IHS Markit commented on Friday’s data and highlighted that the travel and tourism sectors haven taken a major hit amidst the Coronavirus outbreak. Supply chain disruptions and a decline in exports, on the other hand, further weighed on the flash services PMI in February.

On top of that, Williamson added, concerns of further worsening in the economic slowdown along with the uncertainty ahead of presidential elections in the United States that are scheduled in November this year, may also have contributed to reduced spending from the companies.

U.S Flash Manufacturing PMI Posts Its Lowest Since Last August

On the manufacturing front, the flash PMI posted at 50.8 (lowest since last August) in February that marginally escaped dropping into contraction territory as well. The index was registered at 51.9 lasts month while analysts had anticipated it to drop slightly to 51.5 in February.

The output and new orders sub-indices both fell in February as compared to January’s readings. U.S factories have remained weighed since last summer as the trade tensions with China saw a decline in business investments. While signs of recovery were evident in January following officializing the phase 1 trade deal with the world’s second-largest economy, the optimism faded away in February as the Coronavirus emergency continues to hurt business operations and travel/tourism.

Yesterday’s hit to the U.S dollar index saw the EUR/USD currency pair climb from 1.0790 to 1.0860 on Friday.

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