US: PMI Services Index

Thu Jan 04 08:45:00 CST 2018

Consensus Consensus Range Actual Previous
Level 52.4 52.4 to 52.6 53.7 54.5

December's final for PMI services came in at 53.7, down noticeably from 54.5 in November but also up substantially from December's mid-month flash of 52.4. The 1.3 point gain from the flash to the final implies a roughly 55 reading for the last two weeks of the month which actually points to acceleration and solid strength. New orders are the strength for the last two weeks with backlogs also a positive. Hiring is described as solid and price pressures eased though respondents in the sample continue to report upward pressure for fuel costs and, more importantly, wages as well. Less than positive, however, is business confidence in the survey which the report describes as relatively subdued. Still, the gain in the final reading offsets the disappointment for the flash and hints at acceleration for the bulk for the economy going into year-end.

Market Consensus Before Announcement
PMI services slowed sharply in the December flash, down more than 2 points to 52.4. New orders eased to their lowest level in 8 months while hiring fell to a 7-month low. Business optimism came in at the second lowest readings since June last year. The Econoday consensus is calling for no change from the flash, at a consensus 52.4 for December's final.

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.