ALL: Global Services PMI

Wed Sep 06 10:00:00 CDT 2017

Actual Previous
Level 54.1 53.7

The August global services PMI climbed to a reading of 54.1, up from 53.7. The latest reading is a two year high as companies responded to rising levels of new business and backlogs of work. This in turn contributed to further solid job creation and rising business confidence. Global services activity and new orders have now risen in each of the past 97 months.

The latest increases in both variables reflected gains across the business, consumer and financial services sectors. There were notable differences in the rates of growth, however. The strongest expansions were seen at business service providers and the weakest in the consumer services category.

By nation, output increased across most countries covered, the main exceptions being contractions in India and Brazil. Growth accelerated to a 21-month high in the US, three-month high in China and also picked up in Germany, Russia and Ireland. Rates of increase slowed in Japan, the UK, France, Italy, Spain and Australia.

There was a solid increase in global service sector employment, with the rate of jobs growth matching July's 26-month record. Staffing levels were raised in the US, the euro area, China, Japan, the UK, Russia and Australia, but cut further in both India and Brazil. Price pressures increased with rates of inflation for both input costs and output charges picking up.

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.