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You can find the current article at its original source at https://www.theguardian.com/business/live/2016/sep/05/services-sector-pmi-expected-to-ebound-after-brexit-shock-business-live
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| Biggest ever monthly rise as UK service sector PMI hits 52.9 - business live | Biggest ever monthly rise as UK service sector PMI hits 52.9 - business live |
| (35 minutes later) | |
| 10.42am BST | |
| 10:42 | |
| With some solid PMI data in the bag, economists will be looking to tomorrow’s August retail sales data from the British Retail Consortium for a further injection of good news, this time from the High Street. | |
| Forecasters at IHS Global Insight are expecting a strong result, helped by good weather, foreign tourists using the weak pound as an excuse for a shopping spree and a “feel good factor” thanks to Team GB’s gold-plated performance in the Rio 2016 Olympics. | |
| It is also notable that the fundamentals are currently still pretty healthy for consumers with employment at a record high and purchasing power benefiting from earnings growth running well above consumer price inflation. | |
| This has seemingly encouraged consumers to keep spending despite confidence falling sharply in the immediate aftermath of the Brexit vote – and confidence actually recovered some of its losses in August. | |
| However, IHS expects the buoyant mood on the High Street to be relatively short lived. | |
| Consumers are likely to face less favourable purchasing power as inflation rises and earnings growth is limited by companies striving to limit their costs. In addition, unemployment seems seem likely to rise over the coming months. | |
| Meanwhile, a likely softening labour market and reduced consumer confidence will dilute workers’ ability and willingness to push for higher pay awards even though inflation is expected to rise appreciably over the coming months. | |
| There is a very real likelihood that inflation will move above earnings growth during 2017. | |
| 10.22am BST | |
| 10:22 | |
| FTSE 100 unmoved by PMI but sterling jumps | |
| The services sector PMI may have come in ahead of expectations at 52.9, resulting in a healthy figure of 53.2 for the economy as a whole, but the blue-chip stock index remains unimpressed. | |
| Having started the day flat, the FTSE 100 is has edged down by around 0.2% to 6,880. | |
| However, the pound is on the up, reaching a seven-week high of $1.3375 against the dollar. | |
| 10.10am BST | 10.10am BST |
| 10:10 | 10:10 |
| Scratching the surface of the PMI data, it seems that the weakness of sterling is driving up inflation. Here’s more from Chris Williamson, chief business economist at IHS Markit, which publishes the PMI data. | Scratching the surface of the PMI data, it seems that the weakness of sterling is driving up inflation. Here’s more from Chris Williamson, chief business economist at IHS Markit, which publishes the PMI data. |
| While the weaker currency has helped boost exports, the drop in the exchange rate has also sparked inflationary pressures. | While the weaker currency has helped boost exports, the drop in the exchange rate has also sparked inflationary pressures. |
| Input costs rose sharply on average, increasing at the fastest rate for five years. Manufacturing and construction saw particularly steep rises in costs linked to higher imported raw material prices. Both sectors reported the steepest cost increases since mid-2011. Services input costs rose at the fastest rate since November 2013. | Input costs rose sharply on average, increasing at the fastest rate for five years. Manufacturing and construction saw particularly steep rises in costs linked to higher imported raw material prices. Both sectors reported the steepest cost increases since mid-2011. Services input costs rose at the fastest rate since November 2013. |
| Average prices charged for goods and services showed the largest monthly increase since January 2014 as firms passed higher costs onto customers. The rise in factory gate prices was the steepest for five years. | Average prices charged for goods and services showed the largest monthly increase since January 2014 as firms passed higher costs onto customers. The rise in factory gate prices was the steepest for five years. |
| Over at the wealth management arm of Swiss bank UBS they think it’s too soon to breathe a sigh of relief about the Brexit vote aftermath. | Over at the wealth management arm of Swiss bank UBS they think it’s too soon to breathe a sigh of relief about the Brexit vote aftermath. |
| Dean Turner, economist at UBS Wealth Management, said: | Dean Turner, economist at UBS Wealth Management, said: |
| Today’s improvements are in line with the string of robust economic figures we’ve seen throughout August. But, while there is some reason for optimism today, it’s still too early to conclude that the UK has escaped the Brexit vote unscathed. | Today’s improvements are in line with the string of robust economic figures we’ve seen throughout August. But, while there is some reason for optimism today, it’s still too early to conclude that the UK has escaped the Brexit vote unscathed. |
| We still expect growth to slow to zero in the second half of the year, although the current quarter may be a little stronger than anticipated, followed by greater weakness in the fourth quarter. | We still expect growth to slow to zero in the second half of the year, although the current quarter may be a little stronger than anticipated, followed by greater weakness in the fourth quarter. |
| Now that we’ve seen some resilience in the UK economy, many are questioning whether last month’s Monetary Policy Committee decision was the right one. We believe the Bank of England has taken the correct course of action and expect them to ease further before the year is out. | Now that we’ve seen some resilience in the UK economy, many are questioning whether last month’s Monetary Policy Committee decision was the right one. We believe the Bank of England has taken the correct course of action and expect them to ease further before the year is out. |
| Updated | |
| at 10.29am BST | |
| 9.59am BST | 9.59am BST |
| 09:59 | 09:59 |
| All-sector PMI also enjoyed a record rise to 53.2 | All-sector PMI also enjoyed a record rise to 53.2 |
| With service sector survey data from IHS Markit now added to the results from construction and manufacturing, we have a result for the whole economy. | With service sector survey data from IHS Markit now added to the results from construction and manufacturing, we have a result for the whole economy. |
| All-sector PMI hit 53.2, its highest level since March, more than recouping July’s slump to 47.4. | All-sector PMI hit 53.2, its highest level since March, more than recouping July’s slump to 47.4. |
| Christopher Williamson, chief business economist at IHS Markit, said: | Christopher Williamson, chief business economist at IHS Markit, said: |
| While July’s decline had been largely attributed by companies to heightened political and economic uncertainty following the UK’s June 23rd vote to leave the EU, August’s increase reflected a marked improvement in sentiment. Businesses have reported that business and consumer confidence revived in August, with an immediate impact on demand. | While July’s decline had been largely attributed by companies to heightened political and economic uncertainty following the UK’s June 23rd vote to leave the EU, August’s increase reflected a marked improvement in sentiment. Businesses have reported that business and consumer confidence revived in August, with an immediate impact on demand. |
| A variety of factors, including the weaker pound, the establishment of the new government and the Bank of England’s aggressive stimulus are likely to have all helped to reduce uncertainty compared to July. Many companies were seeing business return to normal either simply as a result of customer confidence rising or a stoic determination to “Buck Brexit” and carry on regardless. | A variety of factors, including the weaker pound, the establishment of the new government and the Bank of England’s aggressive stimulus are likely to have all helped to reduce uncertainty compared to July. Many companies were seeing business return to normal either simply as a result of customer confidence rising or a stoic determination to “Buck Brexit” and carry on regardless. |
| “The most important news is a rebound in services activity, with the rise in the business activity index being the largest on record. | “The most important news is a rebound in services activity, with the rise in the business activity index being the largest on record. |
| Hiring also picked up again amid signs of business returning to normal for many companies after the uncertainty caused by the shock referendum result. | Hiring also picked up again amid signs of business returning to normal for many companies after the uncertainty caused by the shock referendum result. |
| IHS Markit says the risk of a recession “has fallen significantly” and predicts the economy will grow by 0.1% in the third quarter. | IHS Markit says the risk of a recession “has fallen significantly” and predicts the economy will grow by 0.1% in the third quarter. |
| They’ve provided a handy graph showing the historical relationship between PMI and economic output (GDP). | They’ve provided a handy graph showing the historical relationship between PMI and economic output (GDP). |
| Updated | Updated |
| at 10.28am BST | |
| 9.44am BST | 9.44am BST |
| 09:44 | 09:44 |
| The better-than-expected services sector PMI result is receiving a warm welcome, albeit with a note of caution. | The better-than-expected services sector PMI result is receiving a warm welcome, albeit with a note of caution. |
| Chris Sood-Nicholls, managing director and head of global services at Lloyds Bank Commercial Banking, said: | Chris Sood-Nicholls, managing director and head of global services at Lloyds Bank Commercial Banking, said: |
| It’s encouraging to see a recovery in the index this month. | It’s encouraging to see a recovery in the index this month. |
| There are bright spots from consumer retail figures and the recent manufacturing PMI. There is also a short-term feel-good factor in the markets as investors return to equities from low-yielding assets as a result of the Bank of England’s intervention on interest rates and quantitative easing. | There are bright spots from consumer retail figures and the recent manufacturing PMI. There is also a short-term feel-good factor in the markets as investors return to equities from low-yielding assets as a result of the Bank of England’s intervention on interest rates and quantitative easing. |
| However, it is too easy to over-interpret often volatile monthly data, particularly sentiment-based indices. Without a sustained period of hard numbers around business investment and trading, it is impossible to get an accurate picture of the economic impact of the vote to leave the EU. | However, it is too easy to over-interpret often volatile monthly data, particularly sentiment-based indices. Without a sustained period of hard numbers around business investment and trading, it is impossible to get an accurate picture of the economic impact of the vote to leave the EU. |
| Updated | Updated |
| at 9.45am BST | at 9.45am BST |
| 9.33am BST | 9.33am BST |
| 09:33 | 09:33 |
| Services sector PMI surges to 52.9 in August | Services sector PMI surges to 52.9 in August |
| The Purchasing Managers Index (PMI) for the UK’s dominant services sector has come in at 52.9, where anything above 50 means growth. | The Purchasing Managers Index (PMI) for the UK’s dominant services sector has come in at 52.9, where anything above 50 means growth. |
| Just to recap, the consensus forecast among analysts was for a flat 50, meaning unchanged activity. | Just to recap, the consensus forecast among analysts was for a flat 50, meaning unchanged activity. |
| So the figure of 52.9 will be greeted with cheers in the City. That’s a record jump for services PMI from one month to the next, compared to a record fall the previous month. | So the figure of 52.9 will be greeted with cheers in the City. That’s a record jump for services PMI from one month to the next, compared to a record fall the previous month. |
| Could this push the FTSE100 above 7,000 for the first time since last Spring? | Could this push the FTSE100 above 7,000 for the first time since last Spring? |
| 9.29am BST | 9.29am BST |
| 09:29 | 09:29 |
| Eurozone PMI at 19-month low on German slowdown | Eurozone PMI at 19-month low on German slowdown |
| The eurozone economy is still expanding but at its slowest pace for 19 months, according to the latest survey of business activity in the region’s major economies. | The eurozone economy is still expanding but at its slowest pace for 19 months, according to the latest survey of business activity in the region’s major economies. |
| The slowdown is largely due to weaker growth in Germany, the eurozone’s largest economy. | The slowdown is largely due to weaker growth in Germany, the eurozone’s largest economy. |
| #Eurozone #PMI at 19-month low of 52.9 as German economic growth slows https://t.co/Jdm5hupvZb pic.twitter.com/5ChUMZzYJc | #Eurozone #PMI at 19-month low of 52.9 as German economic growth slows https://t.co/Jdm5hupvZb pic.twitter.com/5ChUMZzYJc |
| 9.16am BST | 9.16am BST |
| 09:16 | 09:16 |
| A small but significant regulatory announcement this morning, as the London Stock Exchange listing for Argos owner Home Retail Group is cancelled, following its £1.4bn takeover by Sainsbury’s. | A small but significant regulatory announcement this morning, as the London Stock Exchange listing for Argos owner Home Retail Group is cancelled, following its £1.4bn takeover by Sainsbury’s. |
| 8.50am BST | 8.50am BST |
| 08:50 | 08:50 |
| FTSE 100 is flat in early trading | FTSE 100 is flat in early trading |
| The FTSE 100 has started the day in uncertain mood, hovering around last week’s close of 6,894. | The FTSE 100 has started the day in uncertain mood, hovering around last week’s close of 6,894. |
| A 2.2% surge on Friday saw it gain nearly 150 points to within spitting distance of 7,000 but it’s a more muted start to this week. | A 2.2% surge on Friday saw it gain nearly 150 points to within spitting distance of 7,000 but it’s a more muted start to this week. |
| Some of the European markets are doing slightly better though. | Some of the European markets are doing slightly better though. |
| The folks at Spreadex point out that the UK isn’t the only country with PMI data coming out today. | The folks at Spreadex point out that the UK isn’t the only country with PMI data coming out today. |
| While the focus is undoubtedly on the FTSE’s services PMI this Monday the Eurozone does get involved with its own surveys this morning. | While the focus is undoubtedly on the FTSE’s services PMI this Monday the Eurozone does get involved with its own surveys this morning. |
| Already the Spanish figure has surpassed estimates, its services PMI coming in at 56.0 against the 55.1 forecast; Italy, on the other hand, is set to trickle lower, from 52.0 to 51.8 month-on-month, while the French and German readings are expected to match their initial readings at 52.0 and 53.3 respectively. | Already the Spanish figure has surpassed estimates, its services PMI coming in at 56.0 against the 55.1 forecast; Italy, on the other hand, is set to trickle lower, from 52.0 to 51.8 month-on-month, while the French and German readings are expected to match their initial readings at 52.0 and 53.3 respectively. |
| The prospect of this has pushed the CAC and DAD slightly higher, the former rising nearly half a percent to near a three-week high with the latter climbing a more mild 0.2%. | The prospect of this has pushed the CAC and DAD slightly higher, the former rising nearly half a percent to near a three-week high with the latter climbing a more mild 0.2%. |
| Don’t expect any news from the other side of the Atlantic ocean though. As veteran financial pundit David Buik of stockbroker Panmure Gordon points out, it’s Labor Day. That means no trading at all. | Don’t expect any news from the other side of the Atlantic ocean though. As veteran financial pundit David Buik of stockbroker Panmure Gordon points out, it’s Labor Day. That means no trading at all. |
| It's LABOR DAY in US and Canada, today, 5th September 2016 - So Wall Street and Toronto exchanges are CLOSED | It's LABOR DAY in US and Canada, today, 5th September 2016 - So Wall Street and Toronto exchanges are CLOSED |
| Updated | Updated |
| at 9.14am BST | at 9.14am BST |
| 8.24am BST | 8.24am BST |
| 08:24 | 08:24 |
| While the consensus forecast is for the August services sector PMI to come in at 50, analysts at IHS Global Insight think it might have been better than that: | While the consensus forecast is for the August services sector PMI to come in at 50, analysts at IHS Global Insight think it might have been better than that: |
| Specifically, we forecast the services business activity index to have moved back up to 50.7 in August after plunging to 47.4 in July from 52.3 in June and 53.5 in May. This would take it back above the 50.0 level that indicates unchanged activity. | Specifically, we forecast the services business activity index to have moved back up to 50.7 in August after plunging to 47.4 in July from 52.3 in June and 53.5 in May. This would take it back above the 50.0 level that indicates unchanged activity. |
| Based on the experiences of the manufacturing and construction sectors, it is highly possible that services activity benefited in August from clients engaging in some of the activity and orders that were delayed in the immediate aftermath of the Brexit vote. | Based on the experiences of the manufacturing and construction sectors, it is highly possible that services activity benefited in August from clients engaging in some of the activity and orders that were delayed in the immediate aftermath of the Brexit vote. |
| It isn’t all sunny uplands though. Looking further ahead, IHS thinks weakness could persist in certain key areas of the services sector. | It isn’t all sunny uplands though. Looking further ahead, IHS thinks weakness could persist in certain key areas of the services sector. |
| This is most likely to be related to the commercial property sector and also the house market sector (housing market activity is currently muted). In addition, the Bank of England’s regional agents reported in their August survey of business conditions that there was weakness in corporate transactions, such as mergers and acquisitions activity. | This is most likely to be related to the commercial property sector and also the house market sector (housing market activity is currently muted). In addition, the Bank of England’s regional agents reported in their August survey of business conditions that there was weakness in corporate transactions, such as mergers and acquisitions activity. |
| And there may be worse to come. | And there may be worse to come. |
| There are also serious uncertainties about the outlook for the services sector going forward. While the economy has seemingly held up better than expected in the immediate aftermath of the Brexit vote, there is still the very real possibility that activity will increasing be pressurised by prolonged uncertainty (particularly once Article 50 is triggered and negotiations with the EU begin over future relationships). | There are also serious uncertainties about the outlook for the services sector going forward. While the economy has seemingly held up better than expected in the immediate aftermath of the Brexit vote, there is still the very real possibility that activity will increasing be pressurised by prolonged uncertainty (particularly once Article 50 is triggered and negotiations with the EU begin over future relationships). |
| Additionally, the fundamentals for consumers will most likely increasingly soften with purchasing power diluted by rising inflation and muted earning growth. | Additionally, the fundamentals for consumers will most likely increasingly soften with purchasing power diluted by rising inflation and muted earning growth. |
| Unemployment also seems likely to rise. | Unemployment also seems likely to rise. |
| The first jobs report after the EU referendum vote did not suggest any immediate Brexit-related effect. | The first jobs report after the EU referendum vote did not suggest any immediate Brexit-related effect. |
| 7.51am BST | 7.51am BST |
| 07:51 | 07:51 |
| European markets are expected to open higher today and a better-than-expected services sector PMI performance could send the FTSE100 soaring. | European markets are expected to open higher today and a better-than-expected services sector PMI performance could send the FTSE100 soaring. |
| Our European opening calls:$FTSE 6924 up 29$DAX 10737 up 53$CAC 4560 up 18$IBEX 8942 up 33$MIB 17253 up 69 | Our European opening calls:$FTSE 6924 up 29$DAX 10737 up 53$CAC 4560 up 18$IBEX 8942 up 33$MIB 17253 up 69 |
| Indeed, if the FTSE rises by as much as it did on Friday, a healthy 2.2%, the blue-chip index could break the 7,000 barrier, nearly 18 months after it did so for the first time. | Indeed, if the FTSE rises by as much as it did on Friday, a healthy 2.2%, the blue-chip index could break the 7,000 barrier, nearly 18 months after it did so for the first time. |
| 7.45am BST | 7.45am BST |
| 07:45 | 07:45 |
| The agenda: Services sector PMI due at 9.30am. | The agenda: Services sector PMI due at 9.30am. |
| Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. | Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. |
| We’ll get a slightly clearer picture of how the economy is doing post-referendum today with the release of the services sector Purchasing Managers Index (PMI) for August. | We’ll get a slightly clearer picture of how the economy is doing post-referendum today with the release of the services sector Purchasing Managers Index (PMI) for August. |
| The PMI, produced by Markit/CIPS, is one of the most closely-watched surveys of economic activity, monitoring how much life there is in UK’s business sectors. | The PMI, produced by Markit/CIPS, is one of the most closely-watched surveys of economic activity, monitoring how much life there is in UK’s business sectors. |
| Today’s release covers the UK’s dominant services sector - anything from entertainment to banking, retail or insurance - accounting for nearly 80% of the economy. | Today’s release covers the UK’s dominant services sector - anything from entertainment to banking, retail or insurance - accounting for nearly 80% of the economy. |
| The survey for August will be released at 9.30am, with last week’s consensus forecast from analysts predicting the index will rise to 50, indicating unchanged activity. Anything above 50 means growth. | The survey for August will be released at 9.30am, with last week’s consensus forecast from analysts predicting the index will rise to 50, indicating unchanged activity. Anything above 50 means growth. |
| Even a flat result of 50 would represent a bounceback from July, when the survey showed the biggest decline in activity since the financial crisis, falling to 47.4 from 52.3 in June. | Even a flat result of 50 would represent a bounceback from July, when the survey showed the biggest decline in activity since the financial crisis, falling to 47.4 from 52.3 in June. |
| But this could have been down to post-referendum jitters and there have been signs of a rebound since then. | But this could have been down to post-referendum jitters and there have been signs of a rebound since then. |
| The manufacturing sector PMI last week came in at 53.3, as factories shook off the Brexit shock. | The manufacturing sector PMI last week came in at 53.3, as factories shook off the Brexit shock. |
| And the construction PMI released on Friday was 49.2, still a contraction but far better than expected. The resurgence in construction and manufacturing has boosted hopes that the service sector will follow suit. | And the construction PMI released on Friday was 49.2, still a contraction but far better than expected. The resurgence in construction and manufacturing has boosted hopes that the service sector will follow suit. |
| Updated | Updated |
| at 7.58am BST | at 7.58am BST |