US: PMI Services Flash

Mon Apr 27 08:45:00 CDT 2015

Consensus Consensus Range Actual Previous
Level 59.5 58.0 to 60.4 57.8 58.6

The service sector is a key driver for the US economy right now given the export-related struggles facing the factory sector. And the latest news is good with the PMI services flash coming in at a very strong 57.8. This indicates faster-than-average monthly growth vs the long-term average for this reading of 55.9. Growth in new orders remains strong and job hiring is described as robust, the latter offering a positive indication for April's employment report.

Another very positive indication is how upbeat the survey sample is about the business outlook in what is a further indication that general economic weakness early in the year was only temporary. Cost pressures remain subdued though prices have ticked higher this month due likely to the increase underway for fuel costs which however remain low.

The domestic economy right now is healthy, a factor that should boost the housing market this spring and hopefully the jobs sector as well.

Market Consensus Before Announcement
The Markit PMI services index indicates that the service sector is increasingly the key to U.S. economic health. And right now conditions look very solid with the PMI services index jumping to 59.2 in final March, up more than 1/2 point from the March flash reading and up more than 2 points from the final reading for February. The final reading for March is the strongest since August last year. New orders, backlog orders, business activity and employment are all accelerating with inflation readings remaining dormant.

Purchasing Managers' Index (PMI) US Services Flash 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. This Flash Services PMI is based on approximately 85 percent of usual monthly replies and usually is released about a week before the final. It gives an early reading of conditions for the current month.

Investors need to keep their fingers on the pulse of the economy because it is a key factor for how various types of investments will perform. The Markit Services PMI Flash 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 because that 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 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.