Why Should We Bother Ourselves With Services PMIs?

What the heck are services PMIs?

A Purchasing Manager Index (PMI) is basically the assessment of purchasing managers with regard to the business and economic environments. Managers in the services industry are asked to answer a survey which covers different aspects of their businesses from employment, production, new orders, prices, to inventories.

Their sentiments are then quantified and when the math whiz kids are done, they publish a headline figure for the services PMIs.

If the reading is below 50.0, it indicates that the services industry is contracting. Meanwhile, a reading higher than 50.0 would indicate that the industry is growing.

Why do they matter?

Central bankers, economists, industry analysts, businessmen, and traders pay close attention to services PMIs. Heck, who better to tell us how business conditions are than business managers themselves, right? Because of this, services PMIs are seen as reliable leading indicators of economic health.

Services PMIs due tomorrow

Now that we’ve already established that services PMIs are important, let’s take a look at the roster that we have on tap for tomorrow.

Spanish services PMI at 7:15 am GMT, Italian services PMI at 7:45 am GMT, and the final Euro zone services PMI at 8:00 am GMT

The figures from Spain and Italy will be of importance because we saw that the bigger economies of the euro zone, Germany and France, printed high figures. In fact, the German and French PMIs impressed markets so much that they led to speculations that we could soon see the region return to positive growth. Markets will want to see if the periphery nations too, are improving.

U.K. services PMI at 8:30 am GMT

The services PMI from the U.K. tends to get a lot of attention because the service industry contributes the most to the country’s economic growth. According to estimates, the service sector accounts for about 75% of the U.K. economy!

Last week we saw that the manufacturing PMI, also considered as a leading indicator of economic health, top expectations at 54.6 and the previous reading for June was revised up from 52.5 to 52.9. Everyone is interested to see if the service industry also expanded.

U.S. non-manufacturing PMI at 2:00 pm GMT

Since the Fed was pretty mysterious in its last statement whether or not it would taper off asset purchases this year, the non-manufacturing PMI could provide the Fed with clarity in making its decision. A positive reading would give it a reason to push through with it, while a negative reading could give it one more reason to hold it off, so don’t be surprised to see the dollar rally following a positive figure!

There ya have it folks! Those are the services PMIs we have on tap. Which one will you trade?