James Smith, developed markets economist at ING, points out that at 50.2, the latest UK services PMI indicates that the sector barely grew in June and completing a fairly woeful set of PMI releases, following a particularly weak construction reading earlier in the week.
Key Quotes
“First and foremost, this emphasises that second-quarter growth is likely to come in more-or-less flat. Admittedly most of the drag is likely to come from production, which has fallen back in the aftermath of a stockpiling frenzy earlier in the year.”
“Attention within firms will also be increasingly turning back to contingency planning for a possible ‘no deal’ Brexit in October, which is often a costly exercise and will inevitably draw some resources away from possible investment projects.”
“This means that capital spending is likely to resume its downward trend over the summer (first quarter investment rose, although according to Bank of England Governor Mark Carney, this is down to a change in recording methods).”
“While we think a ‘no deal’ Brexit is still relatively unlikely, the ongoing political uncertainty – in particular the growing risk of a general election – will continue to weigh on activity across the economy.”
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