The rate of expansion in global service sector business activity accelerated for the second straight month in November, as solid growth in the US, the UK and the Eurozone offset the more subdued increases in output generally seen in the main Asian service economies. The global services activity index climbed to a three-month high of 54.1 in November. The average reading so far in the final quarter (53.8) is still slightly below that posted in quarter three (54.0).
November saw output rise for the thirty-eighth successive month. Growth hit three-month highs in the US and the Eurozone, and reached a four-month peak in the UK. Within the euro area, faster expansions were signaled in Germany, Spain and Ireland, while growth steadied at a solid clip in Italy. France was the only nation within the currency bloc for which data are collected that saw a deceleration.
Output growth slowed in Japan, China and India during November, with all of these nations reporting rates of expansion below the global average. Brazil and Hong Kong registered sharp contractions although the pace of decrease continued to ease in Brazil while Russia reported only a marginal (and slower) rate of decline.
Service sector employment increased again in November, extending the current sequence of jobs growth to 69 months. However, the rate of inflation remained below the long-run average, as has been the case throughout much of the past four-and-a-half years.
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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