ALL: Global Services PMI

Wed Aug 05 10:00:00 CDT 2015

Actual Previous
Level 53.9 53.5

Growth of global service sector business activity ticked higher in July, as companies responded to a faster intake of incoming new orders. The J.P.Morgan Global Services Business Activity Index posted a reading of 53.9 in July, up from June's five-month low of 53.6, but slightly below the long-run average of 54.3.

Business activity rose for the thirty-fourth successive month, with output growth registered in almost all of the nations for which data were available. The sharpest rates of expansion were in Spain and the UK. The U.S. also figured highly in the growth rankings in third position. A solid increase in services output was also seen in the Eurozone, with expansions registered in each of the big-four euro area nations. Growth accelerated in China, reaching an 11-month high, while India and Russia both returned to expansion. Business activity also rose in Japan albeit at a weaker pace. Only Hong Kong and Brazil reported contractions in output during July. By far the steepest rate of decline was in Brazil, where business activity fell at a joint series record rate.

Job creation was registered in the US, Japan, Germany, the UK, China and India. Slight reductions to headcounts were signaled in France and Italy, while a solid decrease was reported in Russia. The steepest job losses were in Brazil, where services employment fell at a survey record pace. Finally, July data highlighted a further increase in average input costs, which was passed on (in part) to clients in the form of higher service charges.

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.