The global service sector saw a further solid and accelerated expansion of business activity in August as output rose at the fastest pace in four months. A marked disparity remained between the developed and emerging markets, however, as growth picked up in the former but eased in the latter. The August global services PMI reading was 54.4, up from 54.1 in July. The headline index has signaled expansion in each of the past 35 months.
The standout performers were again Ireland and Spain, while strong growth of business activity was also registered in the US (three-month high) and the UK (albeit a 27-month low). Strong rates of expansion continued to be seen in the Eurozone, Japanese, Chinese and Indian service sectors continued, but the downturn in Brazil also continued. Russia fell back into contraction.
New business increased for the seventy-third in as many months. The rate of expansion remained solid, but eased to a seven month low. Rates of increase slowed in the US, the Eurozone, Japan, China, the UK and Russia, while a further steep contraction was seen in Brazil. Germany and India were the only nations to report accelerated growth of new business.
Global service sector employment rose again in August, extending the current sequence of increase to five-and-a-half years. The rate of jobs growth accelerated and was one of the best recorded during that period. Staffing levels rose in the US, the Eurozone and the UK, but fell in Japan, Brazil and Russia. The trend in employment was either at, or near to, stagnation in China, India and France.
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.
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