Markit Services PMI: Business Activity Growth Accelerates In July

The July US Services Purchasing Managers' Index conducted by Markit came in at 54.7 percent, up 0.5 percent from the June estimate. The Investing.com consensus was for 54.2 percent. Markit's Services PMI is a diffusion index: A reading above 50 indicates expansion in the sector; below 50 indicates contraction.

Here is the opening from the latest press release:

July survey data signalled a solid expansion in business activity among US service providers. New orders received by firms increased at the fastest pace for two years, which in turn contributed to a stronger rise in backlogs of work. As a result, firms increased their staff numbers at the quickest pace since last December. At the same time, inflationary pressures remained relatively strong, and business confidence suggestive of ongoing expansion in coming months.

The seasonally adjusted IHS Markit U.S. Services Business Activity Index registered 54.7 in July, up from 54.2 in June. The latest reading signalled the largest expansion of business activity since January and the fourth consecutive month of accelerated growth. Despite being marginally below the longrun series average, the latest upturn in activity was solid overall. [Press Release]

Here is a snapshot of the series since mid-2012.

Here is an overlay with the equivalent PMI survey conducted by the Institute for Supply Management, which they refer to as "Non-Manufacturing" (see our full article on this series here). Over the past year, the ISM metric has been significantly the more volatile of the two.

The next chart uses a three-month moving average of the two rather volatile series to facilitate our understanding of the current trend. Since early in 2016, the ISM metric has shown stronger growth than the Markit counterpart. It will be interesting to see how these two indicators play out for the remainder of 2017.

Both series weakened since 2015 and saw an uptick in the later half of 2016. The interim three-month moving average of the Markit Services index peaked in August of 2014. The ISM index peaked in September of 2015. The two were fairly closely aligned at the beginning of 2016, but they diverged early with the Markit index signaling noticeably weaker growth.