Flash Services PMI (Purchasing Managers’ Index) is an economic indicator that provides an early glimpse of the health and direction of the services sector in a given economy.
The Flash Services PMI is based on survey data collected from a committee of purchasing managers. They are asked to evaluate various aspects of their business, such as new orders, recruitment, inventories and supplier delivery. The answers are then grouped into a single composite index number.
The Purchasing Managers’ Index (PMI) for Flash Services is an important economic indicator for several main reasons:
Timing: The “flash” mapping means that data is released much earlier than the final/full PMI for services, often about one to two weeks before the final release. This makes it one of the early monthly indicators of economic activity.
- Services Sector Insight: The services sector accounts for a large and growing portion of economic activity in most advanced economies. The Purchasing Managers’ Index (PMI) provides a timely pulse for this important part of the economy.
- Predictive Power: Studies have shown that the services PMI has good predictive power for broader economic growth. Changes in the PMI often portend future trends in GDP, employment, and other macroeconomic measures.
- Global reach: Purchasing Managers’ Index (PMI) surveys are conducted in many of the world’s major economies, allowing comparisons between countries and assessing the global economic landscape.
- Main Index: The Purchasing Managers’ Index (PMI) is a leading economic indicator, which means that it tends to change direction before the general economy. This makes them valuable for forecasting and policymaking.
In short, the right timing, sectoral focus, predictive capability, global reach and market sensitivity of the PMI for Flash services make it an important tool for analysts, policymakers, and investors to gauge the health and direction of the broader economy.
Improved services offset UK manufacturing decline in April
The Purchasing Managers’ Index (PMI) is a leading economic indicator, which means that it tends to change direction before the general economy. This makes them valuable for forecasting and policymaking.
The UK’s manufacturing PMI contracted to 48.7 in April, missing estimates of 50.3. The UK services PMI rose sharply to 54.9 in April. GBP/USD holds a higher ground near 1.2370 after the UK’s mixed trade PMIs.
The UK’s seasonally adjusted manufacturing managers’ index (PMI) (S&P Global/CIPS) sharply cut from 50.3 in March to 48.7 in April, surpassing the estimated reading of 50.3.
Meanwhile, the UK’s preliminary services business activity index jumped to 54.9 in April, surpassing the market consensus of 53.0. The previous figure was 53.1.
Commenting on the PMI quick data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said: “April PMI early survey data suggests that the UK economy’s recovery from last year’s recession continued to gain momentum.
“Improved growth in the services sector offset a renewed slowdown in manufacturing to push overall business growth to the fastest level in nearly a year, suggesting that GDP is rising at a quarterly rate of 0.4% after a 0.3% increase in the first quarter,” Chris added.
GBP/USD extends its lead towards the 1.2400 area after mixed UK purchasing managers’ index (PMI) data. The pair adds 0.28% on the day to trade at 1.2383 The pound was the strongest against the New Zealand dollar. The answers are then grouped into a single composite index number.
Bullish Pound Forecasts as PMI, Elections Ignore
GBP/USD expectations remain bullish as the pound shrugs off mixed PMI data. The pair is recovering after falling in the previous session due to the strength of the dollar. Meanwhile, investors mostly ignored the news of the British elections in July.
Purchasing Managers’ Index (PMI) data from the UK revealed on Thursday that the manufacturing and services sectors expanded in the previous month. However, the manufacturing sector jumped from contraction to expansion, rising from 49.1 to 51.3. Meanwhile, activity in the services sector fell from 55.0 to 52.9, although it continued to expand. The hybrid report had little impact on the pound.
Another major event that traders mostly ignored was the news of the UK national elections. Prime Minister Rishi Sunak announced elections on the Fourth of July. Sterling maintained its position near highs after the hotter-than-expected inflation report. Moreover, services inflation remained flat, eroding some bets on a rate cut from the Bank of England in June.
Meanwhile, investors were still digesting the hawkish sentiment in the minutes of the Fed meeting that strengthened the dollar in the previous session. The minutes showed that policymakers have confidence that inflation will continue to fall. However, some were willing to raise interest rates if price pressures remained stubborn.
However, the risk of a rate hike decreased significantly after the recent inflation report. Investors are now hoping to resume last year’s downtrend.
The EUR/GBP pair rose to nearly 0.8520 during the European session on Thursday, as the euro rose after an improvement in the Eurozone’s primary manufacturing PMI. The decline in the Eurozone’s manufacturing sector improved to 47.4 in May from 45.7 in April, beating the expected reading of 46.2 and reaching a 15-month high.
