UK S&P Global Services PMI returns to growth in July, arrives at 51.8

Sagar Dua FXStreet

According to preliminary data, the United Kingdom (UK) S&P Global Services Purchasing Managers’ Index (PMI) arrives above 50.0 in July, a figure that separates expansion from contraction, after declining in June. The Services PMI lands at 51.8, while it was expected to come in higher at 49.4 from 48.8 in June.

The Composite PMI also returns to growth due to a strong increase in both manufacturing and services sector activity. The overall business activity arrives at 52.1 from 49.7 estimates and the previous reading of 49.3. The Manufacturing PMI expands at a surprisingly faster pace to 52.8. The data was already expected to grow but at a moderate pace to 52.0 from the prior reading of 52.5.

“UK businesses reported stronger activity in July, pointing to a faster pace of economic growth at the start of the third quarter. “Hospitality companies saw demand boosted by good weather, the FIFA World Cup and more domestic holidays, as high costs and uncertainty continued to deter some foreign travel. However, overall services growth remained lacklustre amid cost-of-living pressures. Unusually for recent years, manufacturing is now growing faster than services, buoyed by rising exports," Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said.

Market reaction

A slight selling pressure is seen in the British Pound (GBP) after the PMI data release. At press time, GBP/USD trades 0.1% higher to near 1.3326.

Economic Indicator

S&P Global Services PMI

The Services Purchasing Managers Index (PMI), released on a monthly basis by S&P Global, is a leading indicator gauging business activity in the UK’s services sector. Survey responses reflect the change, if any, in the current month compared to the previous month and can anticipate changing trends in official data series such as Gross Domestic Product (GDP), employment and inflation. The index varies between 0 and 100, with levels of 50.0 signaling no change over the previous month. A reading above 50 indicates that the services economy is generally expanding, a bullish sign for the Pound Sterling (GBP). Meanwhile, a reading below 50 signals that activity among service providers is generally declining, which is seen as bearish for GBP.

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