WASHINGTON (Reuters) – U.S. services industry activity slowed steadily in February amid winter storms, while price volumes paid by companies for entry peaked in nearly 12- 1/2 year, strengthening expectations for faster inflation soon. .
The Institute for Supply Management (ISM) said Wednesday that their non-manufacturing activity index fell to a reading of 55.3 last month from 58.7 in January, the highest level since February 2019.
A reading above 50 indicates growth in the services sector, which accounts for more than two-thirds of U.S. economic activity. Economists conducted by Reuters had forecast the index unchanged at 58.7. Brutal winter storms in Texas and parts of the South’s population region lasted in mid-February, leaving millions without water and without power.
But a decline in new COVID-19 cases and an increase in vaccines have allowed authorities to reverse some restrictions on restaurants and other businesses facing consumers. Although the rate of decline in coronavirus diseases has halted, economists still believe that the services industry will recover in the spring and summer.
The pandemic, which has disproportionately affected the services industry by shifting demand to goods, has also created bottles in the supply chain through labor shortages at suppliers and manufacturers. That has left businesses with high production costs.
The survey measured the price of prices paid by service businesses to 71.8 last month, the highest reading since September 2008, from 64.2 in January. It reflected the results of an ISM manufacturing study published Monday and a rise in near-term consumer inflation expectations.
Inflation is expected to accelerate in the coming months in part as weak readings last year under the influence of pandemics drop out of the calculation. Economists are divided on whether the jump in price pressures will last beyond the so-called fundamental effects.
U.S. Treasury yields have skyrocketed, with investors pledging the Federal Reserve’s precarious monetary policy stance and pushing President Joe Biden for $ 1.9 trillion in fiscal stimulus in excess of on $ 900 billion in additional pandemic relief at the end of December ignited inflation.
Fed Chairman Jerome Powell has allayed those fears, citing three decades of lower and stable prices. The labor market is also overcapacity, with at least 19 million people on unemployment benefits.
But home-based Americans with COVID-19 have accumulated too many savings, providing dry energy for consumption. Consumer spending on services is still about 3.3% lower than it was before the virus began in the United States.
The ISM survey measure of new orders for the services industry fell to a nine-month high of 51.9 in February from a reading of 61.8 in January. But backup orders jumped to 55.2 last month from 50.9 in January. Export orders also went strong, which is good for the growth of the sector.
The survey index of earnings in the services industry fell to 52.7 last month from a reading of 55.2 in January.
That could lower expectations for an acceleration in job growth in February. According to a Reuters poll of economists, the government’s earnings report on Friday is likely to show that non-farm payments rose 180,000 jobs in February after receiving just 49,000 in January.
The economy has recovered 12.3 million of the 22.2 million jobs lost through the pandemic. Employment is not expected to return to its pre-pandemic level by 2024.
Reciting with Lucia Mutikani; Edited by Chizu Nomiyama