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21.02.2020 15:04

U.S. private sector business activity declines slightly in February- IHS Markit's survey

Preliminary data released by IHS Markit on Friday pointed to a contraction in business activity in February, which was driven by a significant worsening of the service sector performance, where output decreased for the first time in four years.

According to the report, the Markit flash manufacturing purchasing manager's index (PMI) came in at 50.8 in February, down from 51.9 in January. That was the lowest value since last August. Economists had expected the reading to decrease to 51.5. A reading above 50 signals an expansion in activity, while a reading below this level signals a contraction. According to the report, the lower headline index reading was partially driven by slower expansions in production and new orders.

Meanwhile, the Markit flash services purchasing manager's index (PMI) fell to 49.4 this month, from 53.4 in the prior month. The latest reading signaled the first decline in sector's business activity since February 2016. Economists had expected the reading to drop to 53.0. According to the report, the contraction in the output was in part driven by a renewed decrease in new business across the service sector (the rate of the drop was the strongest since the series began in October 2009).

Overall, IHS Markit Flash U.S. Composite PMI Output Index came in at 49.6 in February, down from 53.3 in January, pointing to the first month of contraction in the private sector since October 2013.

Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at HIS Markit, noted: "With the exception of the government-shutdown of 2013, US business activity contracted for the first time since the global financial crisis in February. Weakness was primarily seen in the service sector, where the first drop in activity for four years was reported, but manufacturing production also ground almost to a halt due to a near-stalling of orders."

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