The services PMI finishes November at a very solid 56.1, down 4 tenths from the mid-month flash but up a strong 1.3 points from October. November is the best full-month showing for this index since August and reflects strength across both business and consumer customers. The report describes new orders as "robust" and "accelerating" and the best since July, which is good news for the U.S. economy where manufacturing, which is directly exposed to the global economy, has been weak. Hiring in the services sample is described as "sustained" though still weaker than the year-to-date average. The outlook is upbeat but a little less so than prior months with some respondents citing uncertainty tied to the interest rate outlook. In a plus, the report also cites strength tied to reduced pressures on household budgets, a reference to low gasoline prices. This report is a plus for the U.S. outlook. Watch for the ISM non-manufacturing report at 10:00 a.m. ET.
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.
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