US: PMI Services Index

Wed Aug 03 08:45:00 CDT 2016

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Level 51.4 51.4

Slow growth is the verdict of Markit's U.S. service sample whose composite index came in only slightly above breakeven 50, at 51.4 for final July which is unchanged from June and up 5 tenths from the July flash. Growth in new orders is, however, a major negative for July with a bounce back for employment, which hit a deep low in June, a standout positive. Another positive, one especially for employment, is an uptick in the year-ahead outlook. Inflation data are once again subdued. This report, especially for orders, has not been running very strongly this year, in contrast to the ISM non-manufacturing report which will be posted at 10:00 a.m. ET this morning.

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.