ALL: Global Services PMI

Fri Nov 04 10:00:00 CDT 2016

Actual Previous
Level 53.2 51.6

The global service sector expanded at a solid rate in October. The reading was 53.2 its highest reading since last November. Both output and new orders rose at the quickest rates in 11 months, leading to further job creation. All sub-sectors improved. Output growth occurred across the business, consumer and financial services sectors. Business service providers saw a solid uptick in the rate of expansion for activity, which reached a 14-month high. Output growth in the consumer services sector was slightly better than September's pace, while financial service providers saw the rate of increase ease from the previous month.

By virtue of its size, the strongest contribution to global service sector growth was the US, where output rose at the quickest pace in 11 months. Solid expansions were also seen in the Eurozone, China, the UK, India and Russia. Both Brazil and Hong Kong contracted, whereas marginal growth was seen in Japan.

Global services employment rose for the eightieth month running in October. Moreover, the rate of jobs growth accelerated to its fastest since July. Average costs increased at the sharpest pace in 15 months during October. The pass-through of rising input prices to clients also led to the steepest increase in output charges since July 2015.

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.