Following yesterday's jump in US manufacturing PMI, Market reports the January flash Services PMI also spiked (after dropping for 2 months) to match manufacturing at 55.1 (notably above the 54.4 expectations). This is the highest Services print since Nov 2015. Hope remains the biggest driver of this 'soft' survey data with growth expectations for the next 12 months were the greatest since May 2015.
Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:
“The improvement in service sector business conditions follows the news earlier in the week that manufacturing also enjoyed a bumper start to the year. The two PMI surveys collectively point to the economy growing at an annualised rate of just over 2.5% in January, and puts the US on a strong footing to achieve faster growth in 2017.
“Although the strong dollar is hitting exports, domestic demand clearly remains buoyant. Companies reported one of the highest inflows of new business for a year and a half as demand lifted higher at the start of 2017.
“Job creation also remained encouragingly solid, and especially impressive given current high overall levels of employment in the economy.
“Job gains are linked to increased optimism about the economic outlook. Business expectations of future growth are at their highest for just over one and a half years.
“The strong start to 2017 and bullish mood for the year ahead adds to our expectation that we will see the Fed hike rates a further three times in 2017.”
IHS Markit currently forecasts that the US economy will grow by 2.3% in 2017, up from 1.6% in 2016.