December was another solid month for Markit Economics' U.S. service sector sample where the headline index comes in at 53.9, only slightly lower than November's 54.6 and October's 54.8 which were 1-year highs. New orders, though slowing, also remained solid in December with hiring especially strong. The strength is reflected in prices with input costs on the rise and selling prices, which have been soft, posting their best month since June 2015. The report cites rising confidence in the business outlook as a central feature of the December sampling. Watch for the ISM non-manufacturing report coming up 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.