- IHS Markit’s gauge of US business output rose to 58.8 in a preliminary February reading.
- The data marks the strongest rate of growth since March 2015.
- Revived activity in the service industry drove the bulk of the improvement. Manufacturers grew, albeit at a slower pace.
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A popular gauge of US business output improved the most in nearly six years as falling COVID-19 case counts lifted the service industry, IHS Markit said Friday.
The firm’s Composite Output Index rose 0.1 points to 58.8 in a preliminary February reading, signaling the strongest rate of expansion since March 2015. The bulk of the improvement was driven by an uptick in the service sector. A measure of service activity rose to 58.9 from 58.3, also its highest level since March 2015.
IHS’ manufacturing purchasing managers’ index declined to 58.5 from 59.2, its lowest point in two months. Readings above 50 indicate sector growth, while those below the threshold signal contraction.
The service-sector improvement marks a major turnaround for the national economy. Economic restrictions imposed during the winter surge in virus cases halted the industry’s recovery as Americans were urged to stay at home. While manufacturers’ growth improved, service businesses dragged on overall output.
“The data add to signs that the economy is enjoying a strong opening quarter to 2021, buoyed by additional stimulus and the partial reopening of the economy as virus-related restrictions were eased on average across the country,” Chris Williamson, chief business economist at IHS Markit, said in a statement.
The data follows a similarly encouraging retail-sales report published by the Census Bureau on Wednesday. Americans’ spending at retailers gained 5.3% last month, trouncing the 1% growth anticipated by economists. The jump was likely fueled by stimulus passed in late December and declining case counts.
Slower manufacturing growth in the month to date was attributed to extreme weather and supply shortages. Supplier delays hit a record high in the preliminary report. Rising input costs across manufacturers and businesses drove the biggest selling-price increase since at least October 2009, IHS said.
Business confidence remained elevated, though down slightly from its recent high. Service businesses reported slightly softer expectations, while manufacturers posted the strongest confidence in three months.
While activity in the service sector ticked higher, it hasn’t yet translated to a hiring surge. Firms expanded their payrolls “only marginally” in February, IHS said. Hiring at manufacturers, on the other hand, reached its quickest rate since December 2017.