US PMI: Factory output contracts for the first time in six years
US economic output shrank for the first time since October 2013 today as the service sector reported its worst performance for four years.
According to IHS Markit Purchasing Managers’ Index (PMI) data, the composite output index fell to 49.6 from 53.3 in January, reaching a 76-month-low.
The drop was driven by services, which fell to 49.4. Manufacturing also fell to 50.8, down from 51.9 in January, a six-month low. Any figure under 50 indicates a contraction, while any over 50 represents growth.
The dollar fell 0.33 per cent against the yen after the figures were released.
The decrease in business activity ended a near-four year sequence of expansion thanks to the decrease in services output and a slower rise in manufacturing production due to supplier delays following the coronavirus outbreak.
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Chris Williamson, chief business economist at IHS Markit, said: “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.
“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.
“The PMI survey data are consistent with GDP growth slowing from just above two per cent in January to a crawl of just 0.6 per cent in February”.
Connor Campbell from Spreadex said that the US PMI results had meant that markets had plunged back towards intraday lows after rallying on better than expected European data earlier today.
Down 0.7 per cent, the FTSE sank to 7390 for the first time in close to 3-weeks. A 1.1 per cent decline for the DAX sent it to a 10-day low of 13550, while a similar drop for the CAC left the French index barely clinging on above 6000.