By Xavier Fontdegloria

Activity in the U.S. services sector grew in February at the fastest rate in more than six years supported by a marked rise in new orders following stronger client demand, data from IHS Markit showed Wednesday.

The final reading for the U.S. Services Purchasing Managers' Index for February was 59.8, up from 58.3 in January and above the flash estimate of 58.9. Economists polled by The Wall Street Journal expected the final services PMI to come in at 58.9.

The indicator marks the seventh consecutive monthly expansion for the service sector. The pace of growth is the fastest since July 2014, IHS Markit said.

The U.S. Services PMI is a survey-based measure of activity in industries such as communications, finances or consumer services. A level above 50 indicates expansion, while a reading below 50 signals contraction.

Although consumer-facing sectors, notably hospitality, travel and tourism, continue to be adversely affected by Covid-19 restrictions, other parts of the economy such as financial and business services are springing back into life, said Chris Williamson, chief business economist at IHS Markit.

"Even some hard hit consumer-facing sectors are enjoying some loosening of restrictions or adapting to life with the virus," he said.

The upturn of activity in February was reportedly linked to stronger client demand and a further rise in new business due to stronger client demand and greater customer confidence following the start of the vaccine rollout, the report said.

However, input costs rose further in February amid increases in supplier charges and wage bills. The rate of cost inflation quickened to the fastest since data collection began in October 2009, IHS Markit said.

In response, service sector firms sought to pass on higher cost burdens to clients, the report said.

"Some of these higher costs will inevitably prove transitory as pandemic-related disruptions to supply start to ease, but it remains unclear how long these price pressures will persist for due to uncertainties over the duration of social distancing requirements and the strength of demand over the coming months," Mr. Williamson said.

IHS Markit said the Composite PMI Index was 59.5 in February, up from 58.7 in January.

Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com

(END) Dow Jones Newswires

March 03, 2021 10:18 ET (15:18 GMT)