Global Service Sector Remains Steady Despite Drop in PMI

In spite of dropping to a three-month low, the global service sector remained solid in May and posted at 54.1, staying above the contraction zone for its 32nd consecutive month. According to May’s JPMorgan Global Services Business Activity Index, employment increased at its fastest pace since 2007.

“Although the PMI indicates the rate of expansion lost further steam, job creation hit an 89-month record and business optimism remained relatively high,” said David Hensley, director of global economics coordination at JPMorgan Chase & Co. “This suggests that the growth rate of the sector should at least hold its ground through mid-year.”

The U.S. service sector followed a similar trend, posting at 56.2 in May—down from 57.4 in April. “Nonetheless, survey respondents remain highly upbeat about their prospects for growth over the next 12 months, with the degree of business optimism rising to its strongest since November 2014,” according to Markit.

In the eurozone, the service sector remained above the 50.0 contraction zone as well, posting at 53.8 in May, a decrease from 54.1 in April. Employment increased for the 70th consecutive month and job creation reached a four-and-a-half year high. Spain recorded the sharpest increases in both output and new orders, while Germany, France and Italy reported business activity growth.

Meanwhile, service activity in China posted at 53.5 in May, up from 52.9 in April. “Service providers saw the strongest upturn in new business for three years in May, which supported sharper growth of activity and employment,” said Annabel Fiddes, economist at Markit.

The service industry in Brazil, however, was not so positive and fell at its fastest rate since March 2009—from 44.6 in April to 42.5 in May. The decrease is attributed to difficult economic conditions and decreasing opportunities for new work.

- Jennifer Lehman, NACM marketing and communications associate

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