It’s the Economy That Matters: Services PMI and More

Economic indicators are released every week to help provide insight into the overall health of the U.S. economy. Despite the economic calendar’s light load last week, there were still important releases that warrant attention. In this article, we explore three of those important economic releases from the past week: the S&P Global Services PMI, the ISM Services PMI, and the trade balance. By examining these data points, we gain a better understanding of the strength of the country’s services sector as well as the latest trajectory of the country’s economic growth.

Policymakers and advisors closely monitor economic indicators, such as these three, to understand the direction of interest rates, as the data can significantly impact business decisions and financial markets. In the week ending on June 8, the SPDR S&P 500 ETF Trust (SPY) rose 1.73%, while the Invesco S&P 500® Equal Weight ETF (RSP) was up 3.32%. The next interest rate decision meeting will be held June 13–14, and the Fed is currently split on what to do next.

S&P Global Services PMI

S&P Global Services PMI

The U.S. services sector showed continued growth in May, according to the S&P Global Services Purchasing Managers’ Index (PMI). In May, the index climbed to 54.9 — just below the 55.1 forecast. The latest reading marked the fourth consecutive monthly expansion and was the strongest pace in over a year.

The expansion in May was largely due to an upturn in employment, increased business and consumer confidence, and improved demand in both domestic and international markets. However, just as demand in the services sector has grown, so have inflationary pressures. Both input cost inflation and output charge inflation remained elevated in May. Service providers reported upward pressure on wages, and increased supplier prices led to greater business expenses. Consequently, those higher costs were passed along to consumers, which led to greater selling prices.

ISM Services PMI