Flash US services PMI
The February flash US services PMI (purchasing managers’ index) report indicates a slower improvement in US (SPY) (QQQ) (VFINX) business conditions this month as compared to last month. It stood at 53.9 in February compared to 55.6 in January 2017. The February reading is below the market’s expectations of 55.8.
The services PMIs include the performance of various services industries such as computer and IT services, hotels and restaurants, transport and communication, and financial intermediaries.
Let’s look at some of the key factors in the services PMI:
- Production volume rose at a slower rate in February 2017.
- New order growth and exports orders rose at a slower rate during the same month.
- Employment growth remained subdued in February 2017.
Services are an important component of US GDP. The contribution of the services industry to the GDP has been gradually increasing. However, the contribution of industry to GDP has fallen gradually. The recent GDP figures suggest that consumer spending contributed a lot to GDP, but the service sector contributed more. A higher services PMI indicates an improved economic condition (ACWI) (VTI).
However, in February, the service sector showed a modest expansion in its business segment. The slower domestic demand mainly hampered the performance of the US service sector (IWM).
In the next part of this series, we’ll see which indicators investors should look at this week.