There's not very many early indications on the service sector and the sample from Markit Economics is reporting only the most modest strength, at an index of 51.0 for the March flash. The index is up from sub-50 readings during February but the trend remains very soft with new orders at their weakest pace in data going back to 2009 and backlogs at an 8-month low. Still, the sample is hiring with employment, at least for now, above average. On prices, low fuel costs are offsetting wage increases with selling prices flat. Early estimates for first-quarter GDP are roughly in the 2 percent area with this report, however, pointing to something below that.
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.
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