US: PMI Services Index

Wed Sep 06 08:45:00 CDT 2017

Consensus Consensus Range Actual Previous
Level 56.9 54.6 to 56.9 56.0 54.7

PMI services for final August posted a very strong 56.0, up 1.3 points from July for the highest result since November last year but still down a sizable 9 tenths from the mid-August flash. But the story of this report is unquestionably about strength with new orders and employment at 2-year highs and business confidence back on the upswing and at its highest level since January. Inflation news is also encouraging, with input costs at a roughly 2-year high and selling prices at a 3-year high. Up until the last couple of reports, strength in this sample had been lagging that of ISM's non-manufacturing sample whose August results will be posted at 10:00 a.m. ET this morning.

Market Consensus Before Announcement
PMI services surged nearly 3 points in the August flash to 56.9 which is the level that forecasters see the index holding at in the final reading. New orders, employment and selling prices were all positives in August's flash report.

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.