Today's Report (12/16/2021)

US private sector businesses indicated a strong upturn in output at the end of 2021, despite the rate of expansion easing to the slowest for three months. Service sector business activity growth remained especially sharp, with manufacturers registering a slight uptick in the pace of expansion in production.

Adjusted for seasonal factors, the IHS Markit Flash US Composite PMI Output Index posted 56.9 in December, down slightly from 57.2 in November, but still signaling a strong rise in private sector business activity. Although slower than rates seen earlier in the year, the pace of output growth was faster than the historic trend.

The seasonally adjusted IHS Markit Flash US Services PMI Business Activity Index fell to 57.5 in December, down slightly from 58.0 in November. The upturn in business activity remained sharp despite slowing to a three-month low as demand conditions strengthened at the end of the year. The pace of new business growth accelerated to the fastest for five months. Foreign client demand also rose.

Operating conditions improved in December, as highlighted by the IHS Markit Flash US Manufacturing Purchasing Managers’ Index (PMI) posting at 57.8 in December, down from 58.3 in November. That said, the health of the sector improved at the slowest pace for a year as output growth remained subdued. The headline index is also continuing to reflect a severe deterioration in input delivery times, with longer supplier lead times ordinarily signaling a stronger sector performance.

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What Is It?

The Service PMI release is published monthly by Markit Economics. The data are based on surveys of over 400 executives in private sector service companies. The surveys cover transport and communication, financial intermediaries, business and personal services, computing & IT, hotels, and restaurants.

The US Markit Composite PMI is the composite report on manufacturing and services.

What Are The Fundamental Effects?

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. 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.

How Does It Affect The Markets?

CURRENCY - Typically with a release of 50 or higher the dollar might bounce higher as it suggests the economy is doing well and inflation is in check.

STOCKS - The Equity market generally reacts positively to a rising PMI, however, if the economy is already in high gear it could suggest an overheating economy and the Federal Reverse might boost interest rates to cool business activity.

BONDS - A release consistently above 50 is typically viewed as bearish for fixed incomes because if the economy is also into an expansionary phase it could aggravate inflation and invite higher interest rates.