ALL: Global Services PMI

Mon Feb 05 10:00:00 CST 2018

Actual Previous
Services - Level 54.1 53.9

January global services PMI accelerated to 54.1, matching the 26-month high registered last October, underpinned by the fastest inflows of new work since July 2015. December's reading was 53.8 up from 53.8 in December. The upturn was broad-based by nation with almost all of the countries covered saw business activity rise, with growth strengthening in the euro area (fastest in over a decade), China (68-month high), Japan and India (both three-month highs). The outlook for the world service sector remained positive with improved inflows of new work. Business optimism rose to a seven-month high, with all of the nations covered forecasting output growth over the coming year.

Solid increases in output were registered for the business, consumer and financial services sectors. The steepest expansion was seen in the latter, with growth hitting a three-month high, followed closely by that recorded at business services firms (albeit slower than in December). The pace of increase in consumer services activity improved to a 27-month high. Employment rose at a solid pace in January while price pressures increased at the start of 2018.

Output growth eased to a nine-month low in the US, 16-month low in the UK and three-month lows in Russia and Australia. The Brazilian service sector stabilised, halting a three-month sequence of contraction.

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.