US: PMI Services Index

Fri Nov 03 08:45:00 CDT 2017

Consensus Consensus Range Actual Previous
Level 55.9 55.0 to 55.9 55.3 55.3

Growth in the nation's service sector remains solid based on Markit's U.S. sample which posted a final October composite of 55.3, unchanged from September though down 6 tenths from the mid-month flash.

Growth in new orders is getting a boost from business investment but still slowed to a 6-month low. Backlog accumulation softened to a 4-month low. Employment growth is solid as are business expectations. Input costs continue to rise but at slowing pace with selling prices also still rising but again at a slower pace.

What stands out in this report is a lack of acceleration which points to a steady but still healthy fourth quarter for the bulk of the economy. Next reading on the service sector comes later this morning with the 10:00 a.m. ET release of ISM's non-manufacturing report. Note that Markit's composite flash for October, which also includes the manufacturing sector, came in at 55.2 vs 54.8 for September.

Market Consensus Before Announcement
PMI services popped back to 55.7 for the mid-month October flash after slowing below 55 during September. Strength was centered in the 6-month outlook offsetting slowing for orders and employment. The consensus for October's final is 55.9.

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.