US: PMI Services Flash

Tue May 26 08:45:00 CDT 2015

Consensus Consensus Range Actual Previous
Level 56.5 54.0 to 58.0 56.4 57.8

Strength in Markit's U.S. service-sector sample is slowing slightly, down more than one point to 56.4 for the flash May reading which is the lowest since January. Growth in new orders is the slowest yet this year with the build in backlog orders at a 10-month low.

Strength in the report is centered in hiring which is up for a 5th straight month and showing its greatest strength since June last year. Strength in hiring points to business confidence where the year-ahead outlook jumped sharply for its best reading since November.

A sharp rise in input costs is also notable, one of the few such readings showing pressure but not confirmed by output prices in the report where traction is easing.

The slowing in this report is offset by the sense of the sample's optimism. With both housing and manufacturing still trying to get in gear, the service sector is definitely the economy's bread and butter.

Market Consensus Before Announcement
With exports weak and the energy sector hurting, the service sector is of increasing importance to the nation's economic health. Markit's PMI services report has been showing solid strength and more is expected for the May flash, at a consensus 56.5.

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.