ALL: Global Services PMI

Tue Apr 05 10:00:00 CDT 2016

Actual Previous
Level 51.4 50.7

March global service PMI improved to 51.4 from February's 40 month low of 50.9. This was the first increase in the level of the headline index for four months. However, at the same time, the reading was among the lowest during the past three years and insufficient to significantly improve the average for quarter one as a whole (51.7, the weakest outcome since Q4 2012).

The strongest rates of expansion in services output among the nations for which March data were available were registered in Ireland, Spain and Germany. The UK and Russia both saw solid and accelerated increases in business activity, while the US returned to growth following a contraction in February.

Japan service sector output stagnated in March, halting an 11-month sequence of expansion. France saw business activity decrease slightly for the second month in a row, although the pace of contraction was negligible and slower than February. The severe downturn in Brazil continued.

March data highlighted a further deceleration in the rate of increase in new business at global service providers. New orders rose at the slowest pace since November 2012. The trend in job creation also moderated, with employment growth running at a five-month low. Staffing levels rose in the US, the eurozone and the UK, although only the US and the UK saw quicker rates of increase. Job losses were registered in Japan, France, Russia and Brazil.

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.