US: PMI Services Index

Thu Sep 03 08:45:00 CDT 2015

Consensus Consensus Range Actual Previous
Level 55.2 55.0 to 55.9 56.1 55.7

The nation's service sector is likely to be insulated to a large degree from the global turbulence hitting financial markets. The services PMI is showing no significant effect, rising 9 tenths from the flash reading to 56.1 which is above the Econoday high-end estimate and the best reading since May. For comparison, the final reading for July was 55.7.

New orders rose at what is described as a solid pace though the slowest in three months which could be a hint of trouble. Backlog orders are also down. But if there is trouble, it's not affecting hiring which the report continues to describe as robust and the strongest since May. Price readings, reflecting lower fuel costs, are moderating.

Market Consensus Before Announcement
The services PMI is expected to hold at the flash 55.2 for the final August reading. New orders have been strong in this report and hiring has been described as robust, a reminder that the domestic economy, apart from global troubles, remains solid.

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.