U.S. services, manufacturing sectors hit wall in February: Markit

(Reuters) – U.S. business activity in both the manufacturing and services sectors stalled in February as companies have grown increasingly concerned about the coronavirus, a survey of purchasing managers showed Friday.

The IHS Markit flash services sector Purchasing Managers’ Index dropped to 49.4 this month, the lowest since October 2013 and signaling that a sector accounting for roughly two-thirds of the U.S. economy was in contraction for the first time since 2016.

Economists polled by Reuters had forecast a reading of 53, down slightly from January’s final reading of 53.4. A reading below 50 indicates contraction.

The services sector new business index dropped to 49.7, the lowest since October 2009, from 52.5 last month.

“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,” IHS Markit chief business economist Chris Williamson said in the report.

Williamson also noted that companies were cautious about spending because of worries about a broader economic slowdown and uncertainty ahead of U.S. presidential elections in November.

The manufacturing sector barely escaped a slip into contraction, with the flash reading there at 50.8, the lowest since August and down from 51.9 in January. Economists had forecast a reading of 51.5, according to the Reuters poll.

The new orders and output indexes for manufacturing both slipped from January.

The factory sector has been in a rut since last summer as uncertainty fostered by the Trump administration’s trade war with China took a toll on business investment. The signing last month of a pact with China had fueled some optimism for a rebound this year, but the coronavirus outbreak has dealt a setback to those hopes as the world’s No. 2 economy continues to struggle with business shutdowns and travel restrictions.