U.S. services sector expands faster in February as COVID-19 concerns grow

The U.S. non-manufacturing sector expanded at a faster pace in February than the previous month, the Institute for Supply Management (ISM), a non-profit U.S. supply management organization, reported on Wednesday.

The non-manufacturing index (NMI), which gauges the performance of the services sector, registered 57.3 percent in February, 1.8 percentage points higher than the January reading, according to the latest Non-Manufacturing ISM Report on Business.

"The non-manufacturing sector reflected continued growth in February," said Anthony Nieves, chair of the ISM's non-manufacturing business survey committee, adding that most respondents "are concerned" about COVID-19 and its impact.

"The past relationship between the NMI and the overall economy indicates that the NMI for February (57.3 percent) corresponds to a 3-percent increase in real gross domestic product (GDP) on an annualized basis," Nieves said.

Meanwhile, economic activity in the U.S. manufacturing sector edged up in February, following a rebound in the previous month, the ISM reported Monday. The Purchasing Managers' Index (PMI) stood at 50.1 percent, down 0.8 percentage point from the January reading.

Any reading below 50 percent indicates the manufacturing sector is generally contracting. The PMI contracted for five straight months from August to December last year.

In a rare move, the U.S. Federal Reserve (Fed), citing "evolving risks" brought by the COVID-19 outbreak, lowered the target range for the federal funds rate by 50 basis points on Tuesday, putting it in a range of 1-1.25 percent.

The magnitude and persistence of the overall effects on the economy "remain highly uncertain," and the situation remains a "fluid" one, Fed Chairman Jerome Powell said in a press conference.

"In response, we have eased the stance of monetary policy to provide some more support to the economy," Powell added.