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UK service PMI dips slightly, but remains well within expansionary territory - ING

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 6, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

    Oct 7, 2015
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    FXStreet (Delhi) – James Smith, Research Analyst at ING, notes that the December’s UK Markit/CIPS service PMI came in marginally below consensus at 55.5, a slight decline from November’s reading of 55.9.

    Key Quotes

    “Looking at the details, the employment element remained strong, although the business expectations component fell to a 34-month low, suggesting that firms are gradually becoming more wary of the planned EU referendum. Overall though, the index remains well into expansionary territory and underlines the fact that the services sector remains the key driver of UK growth.

    As the sub-consensus manufacturing PMI reading earlier this week highlighted, sterling strength and weak external demand made 2015 a difficult year for the manufacturing sector. However, strong employment growth and rising real household incomes have boosted consumer spending, whilst investment has been resilient. Consequently, we look for a 0.6%QoQ growth rate in the fourth quarter, up from 0.4% in the third.

    Despite this, as this survey has highlighted, uncertainty surrounding the EU referendum is building, with a vote looking increasingly likely to occur this year rather than next. With inflation likely to remain low in the first half of this year given the further fall in the oil price seen in recent weeks, and wage growth not picking up as quickly as had been expected, the Bank of England has some room to keep policy loose until the Brexit uncertainty passes. Consequently, we now expect the first rate hike to come in November, with a steady series of rate rises through 2017.”
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