The bulk of the nation's economy expanded but only modestly in March based on Markit Economics' service-sector sample where the PMI came in at a plus-50 level of 51.3 which is up 3 tenths from the March flash and up 1.6 points from February. But the improvement does not include new orders where growth, in an ominous indication for overall activity in the coming months, is at its lowest point in the 6-1/2 year history of the report. Backlog orders are also down. The weakness in orders contributed to a fall in business confidence to another record low. A positive is employment growth, at least for now. Price data are subdued with inputs flat and selling prices up only marginally. The order readings in this report point to increasing slowing for the economy's main engine, services. Up ahead is the ISM non-manufacturing report.
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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