US service industry shrinks again

The service sector represents two-thirds of the US economy

The US service sector contracted less than analysts had expected in February, according to a survey from the Institute of Supply Management (ISM).

The ISM's index of service sector activity hit 49.3 last month, up from 44.6 in January. A figure of less than 50 indicates contraction.

Analysts had forecast 47.3 and the better-than-expected figure sent stocks up and strengthened the US dollar.

Services account for two-thirds of economic activity in the US.

'Relief'

The figure was greeted positively by the market after January's fall - which represented the first decline below 50 since 2003.

The data was "a big relief after January's number had been so incredibly weak", said Stephen Stanley, head economist at RBS Greenwich Capital Markets.

"While the level of activity still seems to be pretty bad, it feels like things have stabilised to some degree."

However, analysts highlight that the state of the world's largest economy remains uncertain.

Anthony Nieves, chairman of the ISM survey, said members' comments were mixed, suggesting they remained cautious about business conditions.

Separate figures released on Wednesday showed a mixed picture.

Factory orders dropped by 2.5% in January, marking the first fall since August, but in line with expectations, Commerce Department figures showed.

Meanwhile, US private sector employment unexpectedly dropped in February for the first time in five years, according to a private report by ADP.