ALL: Global Services PMI

February 3, 2017 10:00 CST

Actual Previous
Level 53.9 53.3

The global service sector business activity accelerated to a 17-month high of 53.9, up from 53.5 in December. The improved expansion rate was largely centered on the US and Russia, as growth held steady in the euro area and eased in both Japan and the UK.

The new business index also improved to an 18-month high. The US services rate of expansion in output was the steepest for 14 months, underpinned by the quickest new business growth for one-and-a-half years. Euro area output was unchanged from December as accelerations in France, Italy and Ireland were offset by slower growth in Germany and Spain. Rates of expansion in service sector activity slowed to a two-month low in Japan and three-month low in the UK, but surged to an eight-and-a-half year record high in Russia. Contractions were recorded in India and Brazil.

By sector, rates of output growth improved across the business, consumer and financial services categories. The steepest increase was seen in financial services, with this sector also registering the sharpest expansion of incoming new business. Backlogs of work rose in January, while business optimism reached a 20-month high. Cost inflation accelerated to a 39-month high in January, but remained below its long-run average.

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.