Tuesday, October 12, 2010

Global Services PMI at 8-Month Low (Chart) "Recovery lost further momentum"


Global Services PMI Dips -1.2%

Global Services PMI at 8-Month Low, Lost Further Momentum

Official Statement The JPMorgan statement about the September 2010 Global Services PMI: "September PMI data signalled that the recovery in the global service sector lost further momentum. The headline JPMorgan Global Services Business Activity Index fell to an eight-month low of 52.3, down further from April's 33-month high. Although the trend in new business improved slightly, the performance of the labour market remained subdued overall."

David Hensley, Director of Global Economics Coordination at JPMorgan, said: ""The global PMI indicates that the recovery in the global service sector moderated further in September. Business activity rose at the slowest pace for eight months and employment was trimmed slightly for the second month in a row. The trend in new business growth improved from August's low, but remained muted overall. With the manufacturing sector also decelerating, economic growth will be sluggish into year's end."
Cycle History The data on the chart below is limited to the latest 14 months ending August 2010. The current September Global Services PMI of 52.3 is down -4.5 and -7.9% from the cyclical 33-month high peak of 56.8 in April 2010. The current PMI is up +2.0 and +4.0% from the intermediate-term bottom of 50.3 in November 2009. Therefore, the current September 2010 Global Services PMI is now below mid-range from the recent top and bottom. The PMI is a percentage - not a total. More about the PMI below the chart.

Trend The August Global Services PMI of 52.3 continues below the 12-month moving average of 53.6 for 2 consecutive months. Since the peak in April 2010, each month has been lower now for 5 consecutive months (May through September). However, any value over 50 indicates expansion so the growth continues at a slower pace. The recent trend is clearly downwards.

Chart (Global Services PMI) Below is a chart of the latest 14 months of the Global Services PMI from August 2009 through the latest month reported, September 2010. The PMI has been greater than 50, indicating global services are expanding, since August 2009 - 14 consecutive months. The PMI peaked in April 2010 at 56.8. Five consecutive monthly declines have ensued through this latest September 2010 decline. However, the 5 consecutive monthly declines still indicate global services are expanding, just at a slower rate.


This is disappointing data, the 5th consecutive monthly decline, and the chart above clearly shows a downward trend. The USA related ISM Non-Manufacturing Index (NMI) increased, bounced off the bottom, in September to stop the downwards trend and was encouraging news. The USA ISM NMI is reviewed here (USA Non-Manufacturing Index (NMI) Up +1.7% in September (Chart) "Continued growth at faster rate"). However, the related JP Morgan Global Manufacturing PMI hit a 14-month low in September and is reviewed here (Global Manufacturing PMI at 14-Month Low (Chart) "Production is likely to stop growing or even contract"). Overall, these global economic indicators are reporting a slowing of the economic recovery.

About The PMI

The Global Report on Services is based on the results of surveys covering around 3,500 executives carried out in the USA by ISM, and in Japan, China, the UK, Germany, France, Spain, Italy, Brazil, India, Russia, Ireland and Hong Kong by Markit, in Australia by AiG, New Zealand by Business NZ and Mexico by HSBC. These countries together account for an estimated 80% of global service sector output. For the US, data are taken from the ISM non-manufacturing survey which, in addition to the service sector included in the other countries, also includes agriculture, construction, mining, public administration, retail, utilities and wholesale sectors. The Hong Kong PMI also covers construction, manufacturing and retail. Questions are asked about real events and are not opinion based. Data are presented in the form of diffusion indices, where an index reading above 50.0 indicates an increase in the variable since the previous month and below 50.0 a decrease. 50.0 = no change level.

Data sources: Country % share of global GDP
United States 28.8
EuroZone 17.7
Japan 12.8
China 6.5
Germany 5.2
United Kingdom 4.3
France 3.8
Italy 2.9
Brazil 2.1
India 2.0
Spain 1.8
Australia 1.3
Russia 1.1
Hong Kong 0.6
Ireland 0.3
New Zealand 0.2

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Other Links
Institute for Supply Management (ISM)
JPMorgan Global Manufacturing PMI Press Release (JPMorgan) (pdf download)
*Data courtesy of the Institute for Supply Management & JPMorgan*

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