Just-released preliminary results of Markit’s monthly U.S. Services Purchasing Managers Index survey point to a sharp slowdown in business activity this month, and respondents say it’s largely due to bad weather.
The report’s headline index fell of business activity fell to 52.7 from January’s 56.7 reading. The employment sub-index fell to 52.0 from 54.1, pointing to a slowdown in hiring as well (table 1).
“Although the latest data pointed to a slowdown in service sector output growth since January, survey respondents widely cited the negative influence of recent weather-related disruptions,” said Markit in the release.
“Moreover, a robust increase in new business volumes and continued job hiring suggested that underlying demand remained resilient. February data meanwhile indicated one of the fastest increases in backlogs of work since the survey began in late 2009, which added to the signs that weaker activity growth reflected temporary weather disruptions.”
Weather has been a hot topic as economic data have come in worse than expected over the past few months.
Goldman Sachs economist David Mericle estimates that unseasonally harsh winter weather this year accounts for a little more than half of the recent slowdown in economic activity.
However, there are likely a few other forces at work as well, including payback from the outsized inventory accumulation by U.S. businesses in the second half of 2013, as well as the recent expiration of emergency unemployment compensation and the expiration of tax credits that encouraged businesses to pull capex investment forward into 2013.