UK’s and Europe’s services PMI picked up in June

Jul 5 • Morning Roll Call • 1212 Views • Comments Off on UK’s and Europe’s services PMI picked up in June

Yesterday services PMI releases came from Europe and the United Kingdom, where the readings were better than expected for both. In the UK, the service sector enhanced at the fastest pace since October 2017, where the services purchasing manager’s index rose to 55.1 in June from 54.0 in the month before, as opposed to the forecasted 53.9. The research from Markit has also shown that the inflation has intensified in June with higher fuel bills and staff salaries that resulted in the fastest rate of prices charged inflation since March 2018. The growth of the service sector activity is taken as a sign that the economy rebounded in the second quarter and increases the chances of August rate hike. According to Reuters, new business flowed in the fastest rate in just over a year, with firms registering a boost to consumer spending from unusually warm weather. However, expectations between the businesses for the next 12 months, when it is expected Great Britain to leave the EU, were below their average for the years since the financial crisis, which is according to HIS Markit caused by Brexit uncertainty.

In addition, EU business growth accelerated in June, which may bring encouragement to the ECB to tighten its policy. Nevertheless, uncertainties over the economy may delay the interest rate hike as per the ECB. The HIS Markit Final Composite PMI for the euro zone that is seen as a good indicator of economic growth rose to 55.2 in June, as opposed to the expected 55.0. According to Jennifer McKeown from Capital Economics, the reading can be seen as a sign that EU is not boarding on the start of a sharp slowdown and it should reassure the European Central Bank that a gradual normalization of policy is necessary.

On Wednesday we have seen that the Germany’s services sector growth accelerated in June to the highest level in four months, where the PMI rose to 54.5 in June. The survey showed stronger new orders reinforced by higher domestic demand, thus in order to meet the demand, service providers had to hire new workers at the highest rate since January this year. The rebound in services have managed to compensate the slower growth in manufacturing, therefore Markit final composite PMI rose to 3 month high of 54.8 from 53.4 in May.


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