ALL: Global Services PMI

Wed May 06 10:00:00 CDT 2015

Actual Previous
Level 54.9 55.1

The global service sector registered further solid growth of business activity and new orders in April. This led to a stronger pace of job creation. The J.P.Morgan Global Services Business Activity posted a 54.9 reading in April.

Although the headline index was down 0.3 points over the month, the rate of expansion signaled was broadly similar to March's six month high. Growth of incoming new orders lost similar momentum (its index was down by only 0.2 points), but also remained close to the previous month's peak. Strong rates of output growth were registered in the U.S., Ireland, Spain and the UK. China, Germany, France, Italy and India all saw solid expansions, but the rates of growth were below the global average. A contraction was signaled in Hong Kong, while the downturn in Brazil deepened.

The outlook for the global service sector brightened in April, as companies' confidence regarding future levels of business activity climbed to a three month high. The ongoing upturn in the sector combined with the improvement in business optimism underpinned further job creation. Global service sector employment increased for the sixty-second successive month in April with the rate of increase the second fastest recorded during that sequence. Job creation was signaled in the U.S. (ten-month high), the Eurozone (three-month low), the UK (four-month low) and China. Losses were registered in India, Hong Kong and Brazil.

Average input costs rose at the quickest pace for six months in April, albeit at a less marked rate than the long-run survey average. Output charge inflation also edged higher, reaching a seven-month peak.

JP Morgan Global Services PMI gives an overview of the global services sector. It is based on 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 percent 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.