Service sector growth tumbled to four-year low last month, ISM says

Service sector growth unexpectedly tumbled last month to a four-year low, the Institute for Supply Management said Wednesday, in another sign that extreme weather has hurt the economic recovery this winter.

The firm’s purchasing manager’s index for non-manufacturing businesses fell to 51.6 in February from 54 the previous month. A figure above 50 indicates the sector is expanding.

Analysts had expected a smaller drop to 53.5.

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In a more troubling sign, ISM’s employment index for the sector plunged below 50 for the first time in more than two years, to 47.5 last month from 56.4 in January.

The drop is not a good sign for job growth last month in the service sector, which is a major part of the economy, ahead of the government’s February unemployment report on Friday.

Payroll processing firm Automatic Data Processing said Wednesday that the service sector added 120,000 net new jobs last month, well below the sector’s average gains during the previous year.

Overall, ADP reported disappointing private sector job growth of 139,000 in February.

ISM’s service sector index last month hit its lowest point since February 2010, with some respondents in the survey attributing the slowdown to bad weather.

“Winter weather is slowing down our projects; it should only be until April,” said one unnamed construction firm.

Construction was one of eight industries the reported contracting last month. Others included real estate, retail, healthcare and hotels and restaurants. Ten industries reported growth, among them agriculture, utilities, educational services and finance and insurance.

Business activity also fell off last month, with that index sliding to 54.6 from 56.3 in January.

But in a positive signal, the index for new orders increased to 51.3 in February from 50.9 the previous month.

On Monday, ISM reported manufacturing growth improved in February after a sharp drop the previous month. But the 53.2 figure last month still indicated bad weather was hampering factory output.