US: PMI Services Flash

Fri Sep 25 08:45:00 CDT 2015

Consensus Consensus Range Actual Previous
Level 55.5 55.1 to 56.5 55.6 55.2

Growth in the services PMI slowed but only slightly in the September flash, down 5 tenths to 55.6 and very near the Econoday consensus for 55.5. The report cites solid domestic conditions especially for consumer-focused service providers.

New orders, however, did slow for a second month and are at their lowest growth rate since January. With new orders lacking, service providers worked down backlogs for the third time in the last four months. The report continues to describe hiring as "robust", at least in comparison to the recovery average.

Respondents are still optimistic on the outlook though the second fewest percentage, since June 2012, see business activity rising. Like most September surveys, both input and output prices are in contraction.

This report is solid but not gangbusters, hinting that conditions, though healthy, may be slowing going into year end.

Market Consensus Before Announcement
Strength in the service sector is central to the nation's economic health and another solid reading is expected for the services PMI where, showing strong gains for new orders and employment, global effects have been hard to find. The flash reading for September is expected to edge 3 tenths higher to 55.5 to signal strong monthly growth.

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.