Global services industry stronger than consensus forecasts

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Non-manufacturing/services PMIs for July surprised economists and analysts on the upside. Where the flash estimate for the euro zone caught the pundits totally off guard earlier this month, the non-manufacturing ISM survey also took them by surprise with the PMI rising to 54.3 in July from 53.8 in June. The consensus forecast was for a drop to 53.0.

Although the JP Morgan Global Services PMI slowed marginally from 54.9 in June to 54.3 in July, the non-manufacturing/services PMI surveys in the three major economic zones, the US, euro zone and China, indicated faster rates of expansion. Contrary to the HSBC China Services PMI that reported a slight increase to 52.6 in July from 52.2 in June, the China Federation of Logistics and Purchasing Non-manufacturing PMI survey, which follows the same methodology as Markit, the compiler of the HSBC survey, surged from 57.4 to 60.1 indicating particularly robust growth.

The non-manufacturing sectors in Germany, France, India and China are expanding strongly, while that of Japan is contracting. However, of concern is Italy where the services sector is now contracting, and it seems as if Spain is likely to follow suit soon.

Country indexNon-manufacturing/Services PMIRate of changeTrend
July 2010June 2010
US54.353.8FasterExpanding
Euro zone55.855.5FasterExpanding
Germany56.554.8FasterExpanding
France61.160.8FasterExpanding
Italy49.651.5From ExpandingContracting
Spain51.351.8SlowerExpanding
Ireland55.755.4FasterExpanding
UK53.154.4SlowerExpanding
Japan46.347.1SlowerContracting
BRIC
Brazil51.350.9FasterExpanding
Russia54.255.4SlowerExpanding
India61.764.0SlowerExpanding
China60.157.4FasterExpanding

Sources: Markit, CFLP.

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