One of the biggest surprises today came from the United Kingdom, where the latest purchasing managers indices reports were much better than anticipated. The composite PMI was 52.4, which, being over 50, indicates that the economy of the United Kingdom is growing, not shrinking. The manufacturing PMI was below 50 at 49.8, but still much better than the previous month. It was the Services PMI that helped push the numbers further upwards, coming in at 52.9, almost 3 points higher than before.
What makes this data so special is that it reflects the state of the UK economy after the December 9 elections. Previously, there were disappointing retail sales and GDP reports from the UK, but they were marred by the commotion leading up to the elections. The bad data led investors to expect an interest rate cut by the Bank of England, whose governor seemed to agree. However, now the robust PMI may delay that rate cut further. The Bank of England’s policy meeting is next week.
Despite the positive inflow of data and the lowering prospects of an interest rate cut, the British pound weakened today.
There were also PMI readings from the rest of the European Union today. Germany’s reports were better than forecasted on all accounts, with the Services PMI leading the charge at 54.2, better than the United Kingdom’s.
However, the overall readings for the eurozone take into account countries besides Germany. Most notably, France has experienced political issues and protests, which have not been kind to the economy. The eurozone Manufacturing CPI was better than forecasted at 47.8, but still indicates that the economy is contracting, rather than growing. The Composite and Services PMIs were both above 50, but lower than expected.
Later today there will be more on economic sentiment, as key figures such as ECB President Lagarde, the UK’s Finance Minister Javid, IMF chief Georgieva, the Bank of Japan’s Kuroda, US Treasury Secretary Mnuchin, and more take to the stage at the World Economic Forum in Davos.
