US: PMI Services Index

Wed Oct 04 08:45:00 CDT 2017

Consensus Consensus Range Actual Previous
Level 55.2 55.1 to 55.3 55.3 56.0

Hurricane effects did little to slow down Markit's U.S. service sector sample whose final September index, at 55.3, is up 2 tenths from the mid-month flash and down only 7 tenths from August. Production held at solid and sustained levels and new orders, driven by domestic demand, are near a 3-year high. Inflation data show wanted traction with input costs, due to hurricane effects, up the most since June last year and selling prices at a 3-year high. Hiring is described as solid though slowing to a 3-month low which is likely tied to only marginal backlog accumulation. Business confidence is still described as "robust" yet the level is the lowest in 7 months. This report also includes Markit's final composite which, when including a 53.1 reading for the September manufacturing PMI released Monday, eased 5 tenths from August to 54.8.

Market Consensus Before Announcement
Though there was little indication of hurricane effects, PMI services did slow noticeably in the September flash to what was still a very solid 54.6 score but down from August's 56.0. Service providers reported increases in both consumer and business spending in the flash report though optimism on future sales slowed to the lowest level since September last year. Inflation readings were mixed with input costs, despite the hurricanes, slowing while selling prices showed the most traction in three years. The consensus for final September, at 55.2, points to expectations for month-end strength.

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.