Growth at U.S. service providers, where most Americans work, slowed to a nine-month low in February as companies grappled with logistical challenges and rising prices at the same time severe winter weather gripped much of the nation.
The Institute for Supply Management's services index fell to 55.3 during the month from an almost two-year high of 58.7 in January, according to data released Wednesday. Even with the decline, it was the ninth-straight month of growth in the services sector. Readings above 50 signal growth.
Economists had expected some rollback from the January high but the size of the February drop was much bigger than expected, driven by a sharp decline in the new-orders index. That fell to 51.9%, down from a January reading of 61.8%.
The services figures also showed prices paid for materials jumped to 71.8 in February, the highest since September 2008. Delivery times also lengthened. The group's manufacturing data, released Monday, showed input costs for factories also were the highest since 2008.
Both reports indicate that supply shortages and labor constraints remain obstacles across a broad range of industries.
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The index of services employment indicated slower growth in February, falling to 52.7 from 55.2.
Anthony Nieves, chairman of the institute's Services Business Survey Committee, said higher energy prices also were affecting the supply chain, which is heavily dependent on trucks to transport products to retail stores and other establishments.
Seventeen service industries reported growth during the month, led by accommodation and food services, wholesale trade, transportation and warehousing, and construction.
The group's measure of business activity also plummeted to the lowest levels since May. While many service providers remain constrained by the pandemic, the setback in February included an arctic blast that disrupted supply chains, caused blackouts and impeded commerce in some areas.
In a sign the slowdown in services activity is probably temporary, the institute's index of order backlogs rose to a six-month high of 55.2, while a gauge of export demand was the strongest since June.
"The services sector is locked and loaded for a summer surge," said Oren Klatchin, lead U.S. economist at Oxford Economics. "Encouraging Covid statistics, accelerating vaccine distribution and the Biden administration's push to make vaccines available to every adult American by the end of May offer hope the health crisis' end is nearing."
Information for this article was contributed by Julia Fanzeres of Bloomberg News (TNS) and by Martin Crutsinger of The Associated Press.