UK Services PMI adds further boost to recent construction and manufacturing growth, ahead of ECB and BoE decisions

Tom Tong06/Ιούν/2013Currency Updates


The eurozone faces a seventh quarter of contraction, an estimate of euro area GDP for January to March published yesterday maintained a 0.2 per cent dip. Worsening the blow for the single currency area, the PMI for May that was released yesterday, suggested that the service sector shrank more severely than expected. The service PMI came in at 47.2 for last month, worse than an earlier estimate of 47.5.

There was some good news in the report, as the eurozone’s composite score – which includes output from much of the economy – rose to 47.7, up from April’s score of 46.9. This indicates that the eurozone is in a slower decline than it was previously, with figures from its largest economies suggesting that the latest downturn may finally have bottomed out. Germany moved back to economic expansion, the data showed, albeit by a very slight margin with a score of 50.2. Also Spain, despite still being in a recession, recorded a 23 month high with its score of 47.2

Latvia got the go ahead yesterday to adopt the euro from 2014, showing its emergence from an economic crisis and signalling to investors that the eurozone is set to expand rather than disintegrate. However, not everyone is convinced with one analyst describing it as, «it’s a bit like getting a last minute Titanic ticket».

Today we have the ECB rate decision coming out; no one is anticipating a change in the rate however market participants are going to be on the look out of any mention of negative deposit rates.


The improved short term outlook for sterling has markedly improved recently with strong previous gains in GDP figures. This growth is still not secured yet as instability in other geographic areas could still have the potential to infect the UK economy with continuing problems. That being said, all the three key sectors have shown steady growth. The PMI figures ( Purchasing Managers Index) hit 54.9, up from 52.9 in April. This is the highest level since March 2012 and being above 50 shows true growth in this sector.

As previously seen the UK economy grew by 0.3% in the last quarter and it looks like this quarter is on track more growth as there are no rumours of double or triple dip recession.

Worries concerning another bubble, however, are not unfounded as the relative ease of cheap money and accessible property has created a rush of first time housing buyers into the market as figures have shown that numbers are up 78.6% YoY in April.

This morning the Bank of England will produce its latest decisions on Interest rate and Quantitative Easing. These figures are forcast to remain the same for this session. However, any change in these has the potential to move the market and create large volatility depending on which way the figures are changed.


The Federal Reserve’s latest beige book yesterday pointed to America’s growth at a «modest to moderate» pace. The Beige Book summarises economic development in 12 key US districts, and showed that there was growth in Dallas; however, other states were less impressive.

Also yesterday the Institute for Supply Management (ISM) supplied its latest non-manufacturing survey which showed that growth for May was 53.7 up from 53.1 in April. This figure has been above the 50 level for growth for 41 straight months showing ongoing expansion in this key sector.

The ISM sub-index for employment, however, showed a slowing to 50.1, meaning that the service sector added very few jobs in the last month. A separate report from ADP said that private firms added just 135,000 jobs in may which was below analysts expectations. Both of these poor jobs figures means that the non-farm payroll data on Friday will be potentially more important that normal as it will either affirm or deny the impact of yesterday’s figures.

Today the dollar has potential to gain volatility from both Initial Jobless claims as well as continuing jobless claims which are both forcast to be less than last month at 345,000 and 2.975M respectively.


Written by Tom Tong

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