US ISM service sector activity gauge jumps in February

Activity in the US services sector accelerated further in February, according to the most widely-followed gauge by financial markets.

The Institute for Supply Management's non-manufacturing service sector index edged higher from 56.5 in January to 57.6 for February.

Economists had forecast a reading of 56.5.

A key gauge of new orders improved from 58.6 to 61.2, alongside a gain in the employment sub-index from 54.7 to 55.2, while another linked to inventories gained from 48.0 to 52.0.

February's index reading for employment was consistent with non-farm payrolls growth during the month of 240,000, Paul Ashworth, chief US economist at Capital Economics said.

In parallel, a sub-index tracking firms' backlogs of new orders jumped from 50.0 to 54.0.

Similarly, the new export orders sub-index increased from 48.0 to 57.0.

In comments made to the ISM, one respondent from the Health Care sector said: "Our business remains strong", while another from construction chimed in "US construction labor is tight".

"Oil prices have stabilized, but not at a level that drives significant increases in capital spending at oil and gas companies. Business activity has increased just slightly", a purchasing manager from the Professional, Scientific & Technical Services said.

The ISM also quoted one Mining purchasing manager as having said "strong 1st quarter for our industry shows promise for 2017."

Following the release of the data, as of 1532 GMT the yield on the benchmark 10-year US Treasury as higher by three basis points at 2.50%.

"A weighted average of the ISM manufacturing and non-manufacturing indices is at a level that would normally be consistent with annualised GDP growth of 4%. The upshot is that, while some of the recent incoming activity date for January has been disappointing, the economy appears to be moving in the right direction," Ashworth added.