The media talk a lot about the manufacturing PMI but the Services PMI is even more important. Markit’s Chris Williamson sums up January’s flash Services PMI:
The flash manufacturing and services PMI surveys collectively suggest that the economy grew in the final quarter of last year at a rate of around 3.5%, and that the pace will have accelerated at the start of the year. The PMIs also suggest that job creation continues to run at a rate of around 200,000 per month, meaning the non-farm payroll numbers should recover from December’s dip.
From the report:
At 56.6 in January, up from 55.7 in December, the Markit Flash U.S. Services PMI™ Business Activity Index signalled a further robust expansion of service sector output at the start of 2014. The latest ‘flash’ PMI reading, which is based on approximately 85% of usual monthly replies, pointed to the steepest rate of service sector growth for four months.
In January, the index was comfortably above the average seen for 2013 as a whole (54.8). Higher levels of business activity reflected a further improvement in underlying demand, as highlighted by a strong upturn in new business intakes at the start of 2014.
US service providers signalled a strong expansion of incoming new work at their units during January, although the rate of growth slipped to a three-month low. Meanwhile, service sector companies recorded a slight reduction in their backlogs of work at the start of 2014, which represented the first reduction in unfinished business since last November.
Service providers were able to reduce their backlogs of work in part due to greater staffing numbers during January. The index measuring employment across the sector has been in positive territory since March 2010, with the latest reading indicating a solid pace of job creation.
Average cost burdens continued to rise during January, and the pace of inflation picked up from the six-month low recorded in December. Some survey respondents attributed the latest increase in input prices to higher transportation costs.
Meanwhile, US service providers increased their own selling prices at the start of 2014, which respondents widely linked to rising cost burdens. Higher prices charged have now been recorded in the service economy for seven successive months.