Friday, December 9, 2011

09/12/2011: Services PMI for November

With all the excitement around the Budget Days, few data series fell into a longer-hold folder. So some catching up is in order. I covered Manufacturing PMI release by NCB in a recent post here. Let's update data for Services PMI before getting back to the core newsflow from Europe.

Services PMI continued signaling expansion and surprised to a slight upside in November. Overall Business Activity Index posted a rise from 51.5 in October to 52.7 in November and the index reading has now been in the expansion territory since January 2011. Year-to-date average is 51.6 and 3mo MA through November is 51.8, while 3mo MA through August was 51.7. As chart below shows, Services activity has been on a higher level, but relatively flat trend since around Q2 2010.

New Business Activity sub-index posted even stronger performance in November, moving from the contractionary 49.7 reading in October to an expansionary 52.6. Year-to-date average is 49.5 and 3mo MA through November is at 49.9, against 3mo MA through August at 48.8. The trend is slightly up recently toward sustained expansion, but it remains shallow and relatively flat since October 2009.

Summary of a more recent data snapshot for the two core indicators below:

Virtually all other series also posted improvements and only two sub-series - Profitability and Employment - remain in contraction (more on these in follow up posts).

Chart above highlights continued pressures on profit margins with Input Prices posting robust expansion in November, against Output Prices posting moderating contraction. Output prices now remain mired in continued contraction since October 2008.

So on the net, decent news on Services side, especially given the conditions in the global economy. However, it remains to be seen if these gains are sustainable over time and have any strengthening momentum that would be required to make a significant contribution to overall growth.

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