PMI Services Index Records Fastest-Ever Growth

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The Markit Ltd. Flash U.S. Services Purchasing Managers' Index (PMI) surged ahead 5.3% to 61.2 for June, according to a Markit Ltd. report (link opens as PDF) released today. Since Markit first began collecting data in October 2009, this is the fastest month-to-month growth it's ever recorded.

The "flash" estimate is typically based on approximately 85% to 90% of total PMI survey responses each month, and is designed to provide an accurate advance indication of the final PMI data. An above-50 reading denotes general growth, while below 50 signals contraction.

Diving deeper into components, June's report includes two crown jewels for hawkish investors. The all-important new-orders index expanded from an already-strong 58.7, to reach 61.6, also a new growth record. Employment, an indicator of longer-term business confidence, solidified its growth with a 2.6 boost, to 55.4. 

From a longer-term perspective, Q2's average PMI reading of 58.1 is also a strong improvement over Q1's 55.1.

In a statement today, Markit Chief Economist Chris Williamson said:

A record high in the services PMI follows news from the flash manufacturing PMI that factory output grew in June at the fastest rate for just over four years. Combined, the two PMI surveys indicate that business activity is growing at the strongest rate seen since prior to the financial crisis. Second quarter GDP data are therefore likely to show a strong recovery after the 2.9% annualized decline seen in the first quarter. Growth in excess of 3% would not be a surprise.

This latest report corroborates additional recent strong economic reports, and is a sign of good (or at least better than Q1) times ahead for the U.S. economy.

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