US Services Sector Surveys Beat Expectations In February As Jobs & New Orders Jump

March 5, 2025

With ‘hard’ data in decline, and US Manufacturing surveys mixed (PMI up, ISM down), the US Services sector data this morning is sure to provide just as little clarity.

S&P Global’s US Services PMI fell from 52.9 (January) to 51.0 (final February) – better than the expected 49.7 and still in expansion (just) but the weakest since April 2024. Of note this is a big bump higher from the 49.7 flash print (contraction) for February.
ISM Services also beat expectations, rising from 52.8 to 53.5, against expectations of a small decline to 52.5

Source: Bloomberg

So just as mixed as the Manufacturing data, but opposite (PMI down, ISM up).

Under the hood, Orders, Employment, and Prices Paid rose on the month with employment at it highest since Dec 2021!!

February was the third month in a row with all four subindexes that directly factor into the Services PMI – Business Activity, New Orders, Employment and Supplier Deliveries – in expansion territory, the first time this has happened since May 2022.

“Slightly slower growth in the Business Activity Index was more than offset by growth in the other three subindexes.

Anxiety continues; however, over the potential impact of tariffs.

Some respondents indicated that federal spending cuts are having negative impacts on their business forecasts.”

The S&P Global US Composite PMI Output Index fell to 51.6 in February, down from 52.7 in January. It was the second successive month in which the PMI has fallen, and the latest reading was the lowest since last April.

Divergent trends were, however, seen at the broad sector level. Manufacturing output rose markedly, but service sector growth softened to a 15-month low.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence:

“The final PMI is an improvement on the earlier flash reading but still paints a worryingly weak picture of service sector business conditions compared to the buoyancy recorded late last year.

“Current output growth has downshifted markedly so far this year from a booming rate of expansion in December to a disappointingly sluggish pace in February.

S&P Global was careful to decouple Biden (current conditions) from Trump (future terrible, horrible world):

“Expectations for output growth have also been revised sharply lower as service providers have become increasingly worried over signs of slower demand growth and uncertainty over the impact of new government policies, ranging from tariffs and trade policy to federal budget cutting.

“The strong private sector hiring seen late last year has consequently gone into reverse, with a steep fall in backlogs of work hinting at further job losses to come.

And soaring prices are all Trump’s fault… even though the tariffs literally just went into place:

“Adding to the gloomier picture in February was a sharp rise in costs, which companies were often unable to pass on to customers due to weak demand. While this reduced pricing power is good news for inflation, it’s potentially bad news for profitability.”

So to sum up: