InvestorQ : Why has the Services PMI gone up sharply in September and what does that mean?
Aditi Sharma made post

Why has the Services PMI gone up sharply in September and what does that mean?

Answer
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Mahima Roy answered.
2 weeks ago


The Markit PMI Services Index for September came in at 49.8; sharply higher than the 41.8 reported in Sep-20. The sharp spurt in the PMI services in September shows that the momentum in the services industry has picked up sharply in September.

The Markit uses the 50 level as the cut-off. A PMI Services of above 50 is considered to be expansionary while a PMI of below 50 is considered to be contractionary. To that extent, even though momentum is positive, the service economy is still contracting.

From a practical standpoint, this shows the impact of the reopening of business units amid the loosening of lockdown rules. Service demand normally tends to lag the demand for industrial products but the momentum in services tends to be quite rapid.

At a broader level, there is a worry that September is the seventh straight month the services activity has contracted. This is the longest contraction stretch in the last 10 years. This is critical since the services sector accounts for 56% of the overall GDP.