Today's Report (10/22/2021)

U.S. private sector businesses recorded a sharp and accelerated upturn in output led by the service sector during October, with growth the strongest for three months, albeit still much weaker than seen earlier in the year.

The seasonally adjusted IHS Markit Flash U.S. Services PMI™ Business Activity Index rose from 54.9 in September to 58.2 in October, to signal the most marked expansion in services activity for
three months.

Driving growth in October was the quickest rise in inflows of new work since July, which was commonly attributed to stronger demand conditions as COVID-19 worries eased during the month.

Adjusted for seasonal factors, the IHS Markit Flash U.S. Composite PMI Output Index posted 57.3 in October, rising from 55.0 in September to signal the fastest uplift in activity for three months and one that was sharp overall. Stronger growth was driven by the services sector, which registered the quickest rate of expansion since July. Meanwhile, the latest rise in factory production was the softest since July 2020 and only mild, as goods producers continued to be severely hampered by material shortages and supply chain delays.

At the same time, inflows of new work to private sector firms rose further, extending the current sequence of improving demand to 15 months. The rate of new order growth slowed slightly since September to the weakest since December 2020 but was nonetheless solid.

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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 a 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.