US: PMI Services Index

Mon Feb 05 08:45:00 CST 2018

Consensus Consensus Range Actual Previous
Level 53.3 53.3 to 53.5 53.3 53.7

Growth in the services PMI held at a moderate 53.3 in the final reading for January, a 9-month low and unchanged from the mid-month flash and down 4 tenths from December.

Slowing output is behind the headline moderation but details show plenty of strength including job growth which remains solid and especially order data with new orders expanding at 4-month high while backlog orders rose at a nearly 3-year high. Another key sign of strength comes from prices with selling prices showing increasing traction and input costs, especially for fuel, continuing to rise.

Despite the headline, this report is pointing to a solid 2018 start for the bulk of the U.S. economy. Today's result together with a slight uptick in January's manufacturing PMI released last week makes for a final composite PMI of 53.8 in January vs 54.1 in December. Watch for the ISM non-manufacturing index later this morning at 10:00 a.m. ET.

Market Consensus Before Announcement
PMI services proved soft at the headline level, held down by soft output and coming in under expectations at 53.3 for the January flash. Yet details were solid including acceleration for both new orders and employment and also traction for selling prices. Econoday's consensus for the January final is the same as the flash, at 53.3.

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.