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UK CommentServices PMI stronger than expected in May

  1. Services sentiment pulled up by current business activity
  2. Growth in new business in the services sector remains weak
  3. PMIs indicate modest rebound in GDP growth in Q2
Services sentiment pulled up by current business activity
The services PMI increased to 54.0 in May, from 52.8 in April, to beat the consensus expectation for a smaller rebound to 53.0. The composite PMI was also stronger than expected in May, increasing to 54.5, from 53.2 in April. Services sentiment was pulled up by an improvement in current business activity, with the latest expansion being the fastest in three months. On the other hand, components measuring new incoming business and employment trended broadly sideways from April. According to the survey, new business volumes continue to rise at a modest pace. Survey respondents noted that subdued consumer spending weighed on business growth and Brexit-related uncertainty remains a key factor holding back decision-making among clients. Business confidence across the service sector moderated for the third time in the past four months. The combination of rising salary payments and higher fuel bills resulted in another strong increase in average cost burdens across the service sector. But despite a sharper rise in operating expenses, the latest data pointed to only a modest increase in average prices charged by service providers, according to the survey.
PMIs indicate modest rebound in Q2
Earlier data prints showed the construction PMI flat-lining in May, with a reading of 52.5, and manufacturing PMI recording a slightly stronger rebound than expected in May, increasing to 54.4, from 53.9 in April. GDP growth in the UK fell to 0.1 percent in Q1, considerably weaker than the market consensus' and the Bank of England's (BoE) expectations of 0.3 percent. Some of the weakness in Q1 was due to unusually cold weather. Based on past form, the composite PMI suggests that GDP growth should pick up from Q1 to Q2, but the numbers seem to indicate a rather modest rebound.


 


 


 


Disclaimer

Kari Due-Andresen

Chief Economist Norway

Norway and UK

kadu01@handelsbanken.no

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