ALL: Global Services PMI

Mon Oct 05 10:00:00 CDT 2015

Actual Previous
Level 53.3 54.4

The global service sector slowed in September, as rates of growth in business activity and new orders both slipped to eight-month lows. The outlook is also becoming more uncertain, with business confidence edging lower and a slight decrease in backlogs of work suggesting capacity may be a notch higher than current demand requires. Growth remained solid in the developed world, despite losing some impetus, whereas the performances of emerging markets remained subdued in comparison. The services PMI reading was 53.3, down from August's four month high of 54.6.

The U.S. remained the main contributor to global service sector output growth in September, despite seeing its rate of expansion ease to a three-month low. Strong increases in business activity were also registered in Ireland and Spain. Combined with further expansions in Germany, France and Italy, this was sufficient to maintain the average rate of growth across the Eurozone service sector close to recent highs. The slowdown in the UK meanwhile continued, taking its pace of expansion down to a near two-and-a-half year low.

Japan, China and Russia all reported modest increases in service sector activity. In contrast, Brazil fell further behind the rest of the pack, remaining in a severe downturn. The rate of contraction in Brazil accelerated to one of the fastest registered in the (Brazil) survey history.

Global service sector employment rose for the sixty seventh month running in September, with the rate of job growth holding broadly steady. Staffing levels were raised in the U.S., Japan, China, Germany, the UK, Spain and Ireland.

Average input prices rose at a slightly sharper pace during September, albeit still relatively weak by the historical standards of the survey. Output charges were unchanged compared to their August level.

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.