The UK services PMI was confirmed at 47.4, exactly like the special preliminary post-Brexit release. This confirms big worries in the services sector after Brexit. The composite PMI stands at 47.5 points. All three PMIs are in contraction territory in July, reflecting a potential contraction of 0.4% in the economy. However, the confirmation today does not change the picture for the BOE’s decision tomorrow.
GBP/USD is slightly higher, bouncing back after sliding earlier. Perhaps markets were expecting a downfall and pushed the pound lower. Basically, cable remains in range.
The new orders component is at 45.7 while Expectations remain positive at 57.6, but also here, lower than previously.
Markit was expected to confirm the figure originally reported in the special report: 47.4 in the services PMI. This is the worst level in many years and clearly reflects the post-Brexit anxiety.
GBP/USD was bouncing a bit higher ahead of the publication, trading around 1.3320. The recent move higher is mostly fuelled by the dollar’s weakness.
The initial report managed to change the mind of one MPC member. Martin Weale had cast doubts about the need for monetary easing but became a proponent once this figure came out. PMIs are forward-looking indicators and not hard data. Nevertheless, they are very closely watched.
Yesterday, the construction PMI came out at 45.9 points, better than an even worse figure expected. However, the final manufacturing PMI was actually lower than the figure originally reported.
The BOE meets tomorrow and the stakes are high:
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