The pace of growth in the U.S. services sector unexpectedly picked up in February to its highest level in a year, according to an industry report released on Monday.

U.S. Jan factory orders fall most in over a year

New orders for U.S. factory goods dropped in January by the most in over a year and businesses cut orders for new capital goods, suggesting one of the drivers of the economic recovery faltered at the start of the year.

COMMENTS:

JOE MANIMBO, MARKET ANALYST, WESTERN UNION BUSINESS SOLUTIONS, WASHINGTON, D.C.

ISM: I think on balance it's consistent with an improving U.S. economy, a notion that can push back expectations the Fed might need to deploy a third round of monetary easing. But if you look a bit deeper at the data we did see the employment index, which is a key gauge for non-farm payrolls, eased from the month before. That can add to some uncertainty ahead of Friday's jobs reports.

Factory orders: Despite the negative reading it was a little better than expectations and the prior number was upwardly revised, so again I think it's consistent with the economy headed in the right direction.

PAUL NOLTE, MANAGING DIRECTOR AT DEARBORN PARTNERS IN CHICAGO

Holy cow, that is a big jump. We got a little bounce in trading after this, and it looks like new orders is the big component. The one drawback is that the employment component pulled back a little bit. We may not see employment numbers that are as good as people are expecting.

TOM PORCELLI, CHIEF U.S. ECONOMIST, RBC CAPITAL MARKETS, NEW YORK

It was overall a solid report. The new orders, which is more of a forward-looking indicator, advanced. That's something that we'd always like to see, but at this level of ISM, this is not really changing our view that you're still looking at around a 2 percent year in terms of GDP, but it is holding up and this is certainly what you want to see.

DAVID SLOAN, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON REUTERS

January factory orders with a 1.0% decline were less weak than the 1.5% decline expected by the market, with durables revised to a less negative number and non-durables unexpectedly positive, with the rise in the latter led by but not fully due to the price-sensitive petroleum sector. Some concern on the weakness of January durable goods orders is still justified, but this report reduces those concerns and raises hopes that the durables weakness will eventually turn out to be one weak month in a volatile series.

(Americas Economics and Markets Desk)