United State Service Sector Growth Accelerated Again in February

The ISM non-manufacturing index indicated that the service sector
expanded for the fifteenth consecutive month in February 2011, and the
pace of growth unexpectedly accelerated again, as the index increased
to 59.7 from 59.4 in the previous month (a reading above 50 indicates
the sector is generally expanding). Market expectations were
effectively for a flat reading of 59.3. The employment sub-index
reached its highest level since May 2006 at 54.5, while the prices
paid component rose to 73.3, its highest level since September 2008.

The surprise increase in the headline ISM non-manufacturing index was
once again met with solid details. Business activity expanded for the
nineteenth month in a row, and the sub-index rose to its highest level
in seven years, increasing to 66.9 from 64.6 last month. The pace of
growth in new orders slowed modestly but still remained near its
six-year highs at 64.4 (down from 64.9 in January 2011). The
employment sub-index went to its highest level since April 2006,
rising to 55.6 in February from 54.5 in the previous month. With
respect to inflationary pressures, growth in prices paid by
non-manufacturing firms accelerated further to 73.3 from 72.1 in
January, the highest level of the sub-index since September 2008.

This week's ISM reports highlight three vital things about the U.S.
economy: overall economic activity is expanding during the first
quarter of 2011; employment is picking up; and input price pressures
are building. The strong advancement in both ISM employment
sub-indices bodes well for February 2011 employment growth to have
accelerated, and we expect that tomorrow's payroll report will show
the private sector added 175,000 jobs in the month. This pace of job
growth, but, will not offset the new entrants into the labour market,
and in fact, we expect the unemployment rate to edge higher to 9.2%.
With regard to prices, yesterday's Beige Book provided anecdotal
evidence that manufacturers and retailers either have or are taking
into account raising prices in response to non-wage input price
pressures; but, these have yet to materialize in monthly inflation
measures. Fed policymakers have repeatedly said that persistently low
inflation and high unemployment were key reasons for maintaining
stimulative monetary policy, and until we see sustained progress in
these areas, we believe that the Fed is unlikely to alter its current
stance.

Source: ActionForex.Com