US: PMI Services Index

Wed Jun 03 08:45:00 CDT 2015

Consensus Consensus Range Actual Previous
Level 56.5 56.3 to 58.0 56.2 57.4

Markit's U.S. service-sector sample continues to report very solid rates of growth though at a little slower pace, at 56.2 vs Econoday expectations for 56.5. The flash reading for May was 56.4 with the final April reading at 57.4.

Rates of new orders and business activity are both solid but, like the headline index, a little slower than previous readings. Backlog orders are up but at the weakest rate since July.

Big positives in the report include the best strength in the 12-month outlook since November. This in turn is reflected in the 5th straight gain for current employment which is as strong as it's been since last June. Price readings in this report are little changed.

The service sector is more important than ever to the U.S. outlook given weakness in the manufacturing sector. Coming up next at 10:00 a.m. ET will be the ISM non-manufacturing report which has been running very strong and also includes data on the construction and mining sectors.

Market Consensus Before Announcement
The health of the economy is increasingly tied to the health of the service sector. The PMI Services Index has been solid but slowing though no further slowing is expected for May where the index is seen rising 1 tenth to 56.5.

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.