US: PMI Services Index

Wed Mar 04 08:45:00 CST 2015

Consensus Consensus Range Actual Previous
Level 56.8 54.0 to 57.0 57.1 54.2

Service sector growth picked up noticeably in February, to a 4-month high of 57.1 vs 54.2 in January. The final reading for February is little changed from the flash estimate of 57.0. Both new business and output are at 4-month highs, reflecting what the report says are stronger customer demand and improving economic conditions.

Employment expansion is described as solid and reflects strong confidence in the business outlook. Cost pressures are dormant with input price inflation, reflecting low fuel costs, unchanged at a 50-month low. Price traction is no more than modest. Markit notes that heavy weather did cause disruptions in the Northeast early in the month but which were reversed by month end.

The service sector, which is domestic based of course, is the bread and butter of the US economy. Coming up next at 10:00 a.m. ET is the ISM non-manufacturing report which has been tracking at a slightly stronger rate of growth than Markit's sample. The ISM report also covers the construction and mining sectors.

Market Consensus Before Announcement
The Markit PMI services flash index for February rose to a 4-month high of 57.0. This compares with 54.2 in final January at 54.0 in the January flash. Hiring was up for month in the sample as were backlogs.

US Services Purchasing Managers' Index (PMI) is based on monthly questionnaire surveys collected from over 400 U.S. companies which provide a leading indication of what is happening in the private sector services economy. It is seasonally adjusted and is calculated from seven components, including New Business, Employment and Business Expectations.

Investors need to keep their fingers on the pulse of the economy because it indicates how various types of investments will perform. The Markit Services PMI provides advance insight into the services sector, which gives investors a better understanding of business conditions and valuable information about the economic backdrop of various markets. The stock market likes to see healthy economic growth which generally 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 Markit PMI Services Flash data give a detailed look at the services sector, the pace of growth and the direction of this sector. Since the service sector accounts for more than three-quarters of U.S. GDP, this report has a significant influence on the markets. In addition, its sub-indexes provide a picture of new business, employment, business expectations and prices.