US: PMI Services Flash

Wed Nov 25 08:45:00 CST 2015

Consensus Consensus Range Actual Previous
Level 55.0 53.8 to 55.3 56.5 54.4

Strength in the service sector, given weakness in global demand, is more vital than ever to the nation's economy and Markit's U.S. sample is pointing to strength with the composite index up more than 2 points to a 56.5 level that well exceeds Econoday's high estimate. The sample's output is the strongest since April and is tied directly to domestic demand. New orders are the strongest since July with gains in both consumer and business categories. Strength is confirmed by a solid increase in employment though a fourth straight decline for backlog orders is containing demand for labor. One negative is caution on the 12-month outlook, the result of the uncertain global environment. Price data remain mute though prices charged are up for a second month. This report is a positive and, together with this morning's durable goods orders on the factory side, point to economic momentum heading into year end and the holidays.

Market Consensus Before Announcement
The service sector is the bread and butter of the U.S. economy and continued strength for the services PMI is expected, at a consensus 55.0 for the November flash for a 6 tenths increase from October. Though gains for November are expected, details in the October report were soft with new business slowing and backlog orders continuing to contract.

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.