US: PMI Services Flash


Fri Dec 18 08:45:00 CST 2015

Consensus Consensus Range Actual Previous
Level 56.1 55.8 to 56.4 53.7 56.5

Highlights
The services PMI is slowing sharply this month, to 53.7 vs 56.1 for the final November reading and vs 56.5 for the flash reading. This is the lowest reading in a year reflecting the slowest growth in new orders since January and a fifth straight month of contraction in backlog orders. Optimism over future growth is understandably down, reflecting what the report says is a subdued global outlook, election uncertainty and softer demand in the energy sector. Price readings remain subdued with inputs at their weakest pace since February. Despite weakness in orders and the downcast outlook, hiring is described as "resilient". Given weakness in global demand, the service economy is the nation's bread and butter and today's report, though only one data point, hints at slowing for the economy.

Market Consensus Before Announcement
The services PMI has been one of the strongest indicators on the calendar and more of the same is expected for the flash December reading, at a consensus 56.1 which would match November's final reading. The report described new orders in November as "robust" and "accelerating" with hiring described as "sustained". The service sector, where exposure to global weakness is limited, is the bread and butter of the U.S. economy.

Definition
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.

Description
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.