US: PMI Services Index

Tue Dec 05 08:45:00 CST 2017

Consensus Consensus Range Actual Previous
Level 54.7 54.7 to 55.1 54.5 55.3

Markit's U.S. service-sector sample reported solid growth but still the softest since June, at a composite score of 54.5 in November which is little changed from the mid-month flash and down 8 tenths from October.

New orders growth are the highlight of the report as is employment which is at a 3-month high. Both input costs for goods and selling prices are rising for this sample.

Business confidence, getting a boost from planned investment and the rise in new orders, is also very strong though slightly lower than October. Yet the report warns that confidence in the year-ahead outlook "deteriorated" which may point to a rise in risk aversion that could hurt future employment and hiring.

A clear negative is a slowing in backlog accumulation in the weakest showing since June. Despite some soft spots, this report is still very solid. Coming up next will be ISM non-manufacturing at 10:00 a.m. ET which has been running much hotter than Markit's survey.

Market Consensus Before Announcement
PMI services slowed slightly in the November flash but details still held solid led by new orders and a 3-month high for employment. Both input costs and selling prices, in a special sign of strength, are increasing for this sample. The Econoday consensus is calling for no change from the flash, at 54.7.

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.