US services cool in February, but not by enough to deter Fed, Markit says

US services sector activity cooled in February, according to a widely-followed barometre of activity, amid possible warning signs for business sentiment.

Nevertheless, that would do little to deter the US central bank from delaying its next interest rate hike.

IHS Markit's service sector purchasing managers' index slipped from its 14-month high of 55.6 in January to 53.8 for February.

That was slightly below the 53.9 which economists had penciled in and the series' long-run average of 55.3, but even so still signalled "solid" levels of activity, IHS Markit said.

Having said that, Chris Williamson, chief business economist at IHS Markit, said: "The burning question is whether the February slowdown merely represents some pay-back after a strong start to the year for US businesses, or whether it’s the start of a more entrenched slowdown.

"A warning clue rests with the business expectations index, which indicates that business optimism has mellowed back to its post-election level, suggesting that companies are becoming more cautious with regard to spending and hiring."

Be that as it may, companies continued to report buoyant domestic demand - especially from consumers - while trends in hiring were reasonable, Williamson added.

Indeed, the February survey by Markit was consistent with 175,000 payrolls being added.

That, Williamson said: "represents a pace of hiring that will do little to deter the Fed from delaying its next rate hike."

Input price inflation continued to outpace firms' charges, but was "modest" and did slow to its least marked pace in five months.