Services PMI slips below forecasts, indicating slower growth in service sector
2025.01.24 12:10
The Services Purchasing Managers’ Index (PMI), a key measure of economic health in the service sector, has fallen below expectations, according to data released by Markit Economics. The index, which is based on surveys of over 400 executives in private sector service companies, came in at 52.8, a significant drop from the forecasted 56.4.
This downturn in the Services PMI is indicative of a slowdown in the service sector, which includes transport and communication, financial intermediaries, business and personal services, computing & IT, hotels and restaurants. The actual figure of 52.8 is a stark contrast to the anticipated 56.4, a discrepancy that could potentially impact the US dollar’s strength.
In comparison to the previous month’s reading of 56.8, the latest figure of 52.8 also represents a noticeable decline. An index level of 50 denotes no change since the previous month, while a level above 50 signals an improvement, and below 50 indicates a deterioration. Thus, while the current reading is still above 50, indicating growth, the pace of this growth appears to have slowed.
A reading that is stronger than forecast is generally supportive (bullish) for the USD, while a weaker than forecast reading is generally negative (bearish) for the USD. As such, this weaker than expected Services PMI could potentially exert downward pressure on the USD.
The Services PMI is considered a critical economic indicator, given the importance of the service sector to the overall economy. While the drop in the index is a concern, it is essential to note that the reading is still above 50, suggesting that the sector is still growing, albeit at a slower pace. As such, analysts and investors will be closely monitoring the sector’s performance in the coming months.
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