January global service sector business activity index followed a similar path to its manufacturing counterpart, edging higher for the first time since last July to a reading of 52.9. The index remained at a level consistent with only moderate growth of output and stayed below both its long-run (54.3) and post-crisis (53.2) averages.
New business slowed to a 21-month low. Service economies in the developed nations tended to outperform those of the emerging markets. The US and the UK both saw their rates of output expansion tick higher, but remain below those achieved through much of 2014, while growth in the euro area rose to a five-month high. Japan also saw a modest expansion. Within the Eurozone, business activity rose in Germany, Italy, Spain and Ireland but decreased in France.
In contrast, China slipped to its weakest in the current six-month sequence of growth, Brazil contracted for the fourth successive month and the downturn in Russia accelerated with output falling to the greatest extent since May 2009. India fared better in comparison, with services activity rising at a moderately improved clip.
Global service sector employment rose for the fifty-ninth successive month in January, with the pace of jobs growth improving from December's nine-month low. Staffing levels were raised in the US, Eurozone, Japan, the UK, China, India and Brazil. Cuts were seen in Russia, France, Italy and Hong Kong. Price pressures remained subdued at the start of 2015. Average costs rose at the slowest pace in over five years while output charges were broadly unchanged for the second month in a row.
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.