US services firms fuel bounce back

THE United States economy this year suffered its biggest fall in output since the depths of recession, but is now bouncing back strongly, figures showed yesterday.

Gross domestic product in the world’s largest economy shrank at an annual rate of 2.9pc between January and March as the harsh winter and a drop in healthcare spending took their toll.

The slump – equivalent to a quarterly fall of more than 0.7pc – was the most severe since the first three months of 2009 in the aftermath of the collapse of Lehman Brothers.

But separate figures showed that services firms in the US grew at the fastest pace for at least four-and-ahalf years in June as the economy bounced back.

The purchasing managers’ index of activity in the sector – where scores above 50 represent growth – rose from 58.1 last month to 61.2 this month.

It was the best score since the survey started in October 2009.

Chris Williamson, chief economist at Markit, which publishes the index, said it showed services firms were growing at the fastest rate since the recession.

‘Disappointing data showing US GDP suffered a steeper than previously thought downturn at the start of the year has been rapidly overtaken by more up-to-date survey data which show the economy surging in June,’ he said.

‘The survey data add to evidence that the economy rebounded strongly in the second quarter after the larger than previously estimated contraction of GDP in the first quarter.’

Many analysts now expect growth of around 3pc on an annual basis in the second quarter of the year.

‘We have ample evidence that the first quarter was just a temporary setback for the economy, and we are climbing out of the hole in the current quarter,’ said Stuart Hoffman, chief economist at PNC Financial.

Mark Zandi, chief economist at Moody’s Analytics, added: ‘We should have a much better second half this year and a much better 2015 than 2014.’