Growth of global services business activity and incoming new orders both accelerated to five month highs in February. The expansion tested capacity at a number of firms, leading to higher backlogs of work and encouraging further job creation. Business confidence remained close to January's high. February's reading for the global services PMI climbed to 54.0 from 52.9 in January. February's reading signaled expansion for the twenty-ninth month running. The headline index also moved back above its average for the current sequence of growth.
The large relative sizes of the US and the UK meant they were the prime drivers of the expansion of global services business activity. Growth of US output and new orders both accelerated sharply to four-month highs, while in the UK the comparable rates of increase held broadly steady at their already elevated levels. The expansion in the Eurozone service sector also gathered pace, with output rising at the fastest rate since last July. China, Brazil, India and Hong Kong all reported growth of business activity too.
In contrast, Japan and Russia signaled contractions. Japanese services output fell for the first time in four months, whereas for Russia the decline was the fifth in as many months and the steepest for almost six years.
Global service sector employment rose again taking the current sequence of sustained jobs growth to five years. Staffing levels were raised in the US, the Eurozone, China, the UK and Brazil. Job losses were registered in Japan, France, Russia (steepest since July 2009), India and Hong Kong. February saw both input costs and output prices increase further. Although the rates of inflation accelerated slightly over the month, they remained only moderate overall.
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.
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