ALL: Global Services PMI

Tue Jan 06 10:00:00 CST 2015

Actual Previous
Level 52.3 53.5

December service PMI eased to 52.3, down from 53.4 in November. This was the weakest since October 2013, as the pace of increase in new orders hit a 20-month low. However, the performance over 2014 as a whole remained positive despite the end of year slowdown, with the average rates of expansion for output and new orders the strongest since 2010.

Ireland and the UK were at the top of the global services business activity growth rankings in December. Irish output rose at the fastest pace since June, but growth in the UK slipped to a 19-month low. The rate of expansion in the US service sector also continued to slow in December. Activity growth decelerated for the sixth straight month to its lowest since February. The rate of increase in Eurozone service output, meanwhile, ticked slightly higher but remained below the US.

Mild increases in activity were signaled in Japan, China, India and Hong Kong, in contrast to the slight contraction in Brazil and deep downturn in Russia. Growth of global service sector new business eased to a 20-month low in December. Rates of increase slowed in the US, China, the UK, India and Brazil, while contractions were signaled in Japan, Germany, Italy and Russia.

Employment rose for the fifty-eighth successive month albeit at the weakest pace since April. Job creation was seen in the US, the euro area, Japan, China, the UK, Brazil and India.

JP Morgan Global Services PMI gives an overview of the global services sector. It is based on non-opinion based monthly surveys of over 5,500 executives from 15 of the world's strongest economies, including the U.S., Japan, Germany, France and China which together account for nearly 80% of global services sector's gross value added (GWA). It reflects changes in global output, employment, new business, backlogs and prices. The Global Services PMI is seasonally adjusted at the national level to control for varying seasonal patterns in each country and is produced by J.P. Morgan and Markit in association with ISM and the International Federation of Purchasing and supply Management (IFPSM).

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. The J.P. Morgan Global Services PMI provides advance insight into the global services sector, which gives investors a better understanding of business conditions and valuable information about the economic backdrop of global markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures. The PMI data are also used by many Central Banks to help make interest rate decisions.

The JP Morgan Global Services PMI data give a detailed look at the manufacturing sector, how busy it is and where things are headed. Since the services sector accounts for the lion's share of GDP of many advanced economies, this report has a big influence on the markets. In addition, its sub-indexes provide a picture of global output, employment, new business, backlogs and prices.