ALL: Global Services PMI

Mon Nov 06 10:00:00 CST 2017

Actual Previous
Level 54.1 54.0

The global service sector expanded solidly in October with a reading of 54.1, up from 53.8 in September. Output growth accelerated across the business, consumer and financial services sectors. The steepest increase was by financial service providers and the weakest by consumer services firms.

National PMI data also pointed to a broad-based increase in business activity with only Brazil failing to register an expansion. Eurozone nations continued to fare comparatively well, even though growth eased on average over the month. Within the currency union, France saw a stronger pace of service sector expansion (seven-month high) whereas growth slowed in Germany, Italy, Spain and Ireland. UK service sector output climbed at the quickest pace in six months, while growth steadied at a robust level in the US. Rates of expansion accelerated in China, Japan and India, but remained below the global average in all three cases.

New business indicated continued growth although the rate of growth slipped to a six month low. The upturn was nevertheless still sufficient to test capacity, as backlogs of work rose for the fifteenth consecutive month. Job creation was recorded again in October, with the pace of increase staying among the best registered over the past two-and-a-half years. Employment rose in almost all of the nations covered by the survey except Brazil.

Price inflation eased slightly during October. Average costs rose at the slowest pace in three months, reflected in an weakening of output charge inflation to a six-month low. Rates of increase in both price measures were slightly stronger (on average) in developed nations compared to emerging markets.

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.