ALL: Global Services PMI

Wed Oct 04 10:00:00 CDT 2017

Actual Previous
Level 54.0 54.1

In September the global service sector continued to make solid progress. The global services PMI recorded a reading of 54.0, down from 54.1 in August. The index has signaled expansion for 98 consecutive months. Output increased across the business, consumer and financial services sectors. The strongest expansion was in financial services, with the rate of growth in business activity accelerating sharply to a three-month high on the back of the steepest increase in new orders since May. Although consumer services saw the weakest expansions in both new business and output, rates of increase picked up in both cases.

By nation, output rose at faster rates in Germany, the UK, France, Spain, Russia and Ireland. Growth continued in the US, Japan and Australia (albeit weaker than in August), while Brazil returned to expansion after declines in the prior four months. Service sector employment rose again in September, with the pace of jobs growth staying close to recent highs. Price pressures edged higher. Average costs rose at the joint-quickest pace in over four years, leading to the steepest increase in output charges since April 2014.

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.