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What's going on?
According to an influential survey released on Tuesday, the pace of US business activity has pulled back from the highs it hit in the months immediately following the presidential election.
What does this mean?
The survey suggested that activity in January grew at the fastest pace in 14 months, but growth slowed coming into February. The slowdown was driven by the service sector, which includes businesses like accounting firms and restaurants and makes up about 80% of economic activity in the US. Manufacturing activity pulled back only very slightly from January and remains near its highest level in almost two years.
Businesses optimism about the outlook for the next 12 months fell quite sharply, which could bode poorly for future months. Nevertheless, the overall level of activity remained above the level where its been for most of the past two years so this is only a moderate pullback.
Why should I care?
For markets: The strength of the US economy is an important question for investors right now.
US stock prices have hit numerous new record highs in recent months (stocks in other countries have done very well too). Part of the reason is that economic data has been positive. Of course, this is just one survey and more information is needed, but if investors see that economic growth is cooling, they will likely become more concerned.
The bigger picture: The eurozone was the star performer on Tuesday compared to the US.
According to a similar survey in Europe, economic activity in the eurozone hit its highest level in almost six years. Also, job creation was at its fastest pace in almost 10 years. The data is further evidence that the eurozones economy has decisively picked up steam in recent months.
Originally posted as part of the Finimize daily email.
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