US: PMI Services Index

Thu May 03 08:45:00 CDT 2018

Consensus Consensus Range Actual Previous
Level 54.4 54.4 to 55.0 54.6 54.0

A strong growth rate in new orders leads an upbeat PMI services report for April. The headline index ends April at 54.6, up 2 tenths from the mid-month flash and up 6 tenths from March. Employment growth in the sample remains very strong as do backlogs while confidence in the outlook is picking up, hitting a nearly 3-year high.

All this strength is being reflected in prices with both input costs and selling prices on the rise. These results together with last week's PMI manufacturing report make for a 7 tenths gain in the PMI composite to 54.9 in April.

Market Consensus Before Announcement
PMI services edged higher in the flash for April and are expected to hold at a solid 54.4 in the final. Order readings were the highlight of the flash report.

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.