US services sector accelerate

The recovery in the US economy may be becoming less dependent on manufacturing. From Bloomberg on Wednesday.

Service industries in the U.S. accelerated in February more than anticipated, indicating the economic expansion may soon create jobs following the worst employment slump in the post-World War II era.

The Institute for Supply Management’s index of non- manufacturing businesses, which covers almost 90 percent of the economy, increased to 53 from 50.5 in January. Last month’s reading was the highest since October 2007 and exceeded all estimates of 73 economists surveyed by Bloomberg News.

Other reports on Wednesday also showed improvement in the economy.

The Fed, in its Beige Book business survey, called the improvement in economic activity this year “modest”...

Companies cut an estimated 20,000 jobs in February, in line with forecasts and the smallest drop in two years, data from ADP Employer Services also showed today. The decrease reflected reductions at construction companies as manufacturers and service providers added to payrolls...

A separate report from the job placement firm Challenger, Gray & Christmas Inc. showed employers in February announced the fewest job cuts in more than three years. Planned firings fell 77 percent last month from a year earlier, the Chicago-based firm said today.

In the euro area, however, services slowed in February. From Bloomberg on Wednesday:

Europe’s service and manufacturing industries expanded for a seventh month in February as companies stepped up output to meet reviving global demand.

A composite index based on a survey of euro-area purchasing managers in both industries remained at 53.7 last month, the same as in January, London-based Markit Economics said today...

An index of services, which account for the largest part of the euro-region economy, dropped to 51.8 in February from 52.5 in the previous month, Markit said today. A gauge of manufacturing rose to 54.2 from 52.4 in January.

Other negative news in the euro area on Wednesday included a 0.3 percent fall in retail sales in January.

The UK, however, reported a rebound in the services sector. From Reuters:

The services sector bounced back faster than expected in February to record its strongest expansion in more than three years, a survey showed on Wednesday...

The four-point jump in the CIPS/Markit services PMI index -- to 58.4 from 54.5 -- more than reversed January's fall and took the index to its highest level since January 2007...

Recent evidence on the economy has been mixed. Retail sales fell sharply at the start of the year, depressed by a rise in VAT and unusually heavy snowfall, but many forward-looking indicators have been more upbeat.

A survey by the Nationwide Building Society on Wednesday showed British consumer confidence hit a two-year high in February and REC/KPMG figures showed a further pick-up in Britain's job market last month.

Japan also saw improvement in service activity in February, although it remains in contraction based on the Japan Nomura services purchasing managers' index reading of 44.6 in February, up from 43.4 in the previous month.

Also contracting recently is Japanese capital spending. From Bloomberg today:

Japanese businesses cut spending for an 11th quarter even as their earnings rebounded, signaling a revival in exports remains insufficient to prompt investment that would spur the recovery.

Capital spending excluding software fell 18.5 percent in the three months ended Dec. 31 from a year earlier, the Finance Ministry said today in Tokyo. Sales declined and profits doubled.