Feb 24, 2020 - Economy

U.S. services and manufacturing sink in February

Data: Investing.com; Chart: Danielle Alberti/Axios
Data: Investing.com; Chart: Danielle Alberti/Axios

The U.S. economy has taken a significant hit so far in February, due in part to the coronavirus outbreak.

By the numbers: The all-important U.S. services sector contracted for the first time in four years, data released Friday from IHS Markit showed, and fell to its lowest level in more than six years.

  • The composite index, which includes services and manufacturing, dropped to its lowest in six years, ending a nearly four-year period of expansion.

Why it matters: The services sector accounts for more than two-thirds of the U.S. economy and held up remarkably well last year as the U.S.-China trade war ravaged manufacturing and sent the industry into recession.

Warning: The rate of decline for new business was the strongest in the history of the survey, dating back to October 2009, and total new orders fell for the first time in more than a decade, according to IHS Markit.

Reality check: Economists largely expect the negative impact of the coronavirus to recede after the second quarter, but IHS Markit chief economist Chris Williamson warned that it was not the only issue weighing on this month's readings.

"The deterioration in was in part linked to the coronavirus outbreak, manifesting itself in weakened demand across sectors such as travel and tourism, as well as via falling exports and supply chain disruptions."
"However, companies also reported increased caution in respect to spending due to worries about a wider economic slowdown and uncertainty ahead of the presidential election later this year."

But, but, but: Friday's reading was a flash estimate of the current month and IHS Markit, along with data provider ISM, will release a deeper look at February's manufacturing and services in early March.

Go deeper: Economists warn coronavirus risk far worse than realized

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