US: PMI Services Index

Tue May 05 08:45:00 CDT 2015

Consensus Consensus Range Actual Previous
Level 57.7 57.5 to 59.1 57.4 59.2

With housing flat and manufacturing down, service is the bread-and-butter sector of the economy right now. The PMI services index held at a very strong 57.4 vs an even more impressive 59.2 in March. The sample's confidence in the long-term US economic outlook is strong as is hiring. Both costs and finished prices rose but from low levels. Still, these are some of the first inflation signals of any report. Today's report underscores the strength of the domestic economy. The ISM non-manufacturing report, to be posted at 10:00 a.m. ET, has also been showing solid strength.

Market Consensus Before Announcement
The PMI services index has been strong, underscoring the strength of the domestic economy. The mid-month flash for this report came in at 57.8 with expectations for the final reading at 57.7. The long-term average for this index is 55.9. Recent strength has been centered in new orders and also employment where gains have been robust.

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.