U.S. services growth dips in February: Market

Wed Mar 5, 2014 9:07am EST

A worker washes the windows of a silver line bus station in Boston, Massachusetts August 12, 2013. REUTERS/Brian Snyder

A worker washes the windows of a silver line bus station in Boston, Massachusetts August 12, 2013.

Credit: Reuters/Brian Snyder

(Reuters) - Growth and the pace of hiring in the U.S. services sector slowed in February, an industry report showed on Wednesday, though industry executives said unusually bad weather was in part to blame for disruptions in economic activity.

Financial data firm Markit said its final service sector purchasing managers' index dipped to 53.3 in February from 56.7 in January. A reading above 50 signals economic expansion, and the result was better than Markit's preliminary "flash" reading of 52.7 released last week.

Employers in the service sector, which accounts for about three-quarters of the U.S. labor market, continued to add employees, but at the slowest rate since March 2013. The final employment index came in at 51.9 in February, compared with 54.1 in January.

This winter has been colder than usual, with severe snowstorms affecting large parts of the Northeast, Midwest and Upper Midwest of the country, and the Southeast has experienced unusual ice storms in recent weeks as well. Investors have largely attributed a spate of weak economic releases to the weather, and expect a rebound in growth in the spring.

Chris Williamson, chief economist at Markit, said the rate of growth was estimated to have held steady from January when excluding those that cited the weather as a reason for slack demand.

"There are therefore strong grounds to believe that the underlying health of the economy remains sound and that growth will pick up again," he said in a statement.

The surveys suggest nonfarm payrolls growth of about 125,000 for February, Williamson said.

The Labor Department will release the highly anticipated unemployment report on Friday. A Reuters poll shows economists expect a gain of 150,000 in nonfarm payrolls after two weather-depressed months.

February's final composite PMI, a weighted average of manufacturing and services indexes, fell to 54.1 from 56.2 in January. The flash reading was 53.5.

The employment component of that index fell to 52.3 from 53.9 in January; the flash reading was 52.4.

(Reporting By David Gaffen; Editing by Meredith Mazzilli)

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