United Kingdom flash S&P Global Services PMI unexpectedly arrives lower at 48.7 in June vs. 50.0 estimates

Sagar Dua FXStreet

Preliminary United Kingdom flash S&P Global Services Purchasing Managers’ Index (PMI) declines at a faster pace to 48.7 in June from 49.3 in May. The Services PMI was expected to arrive higher at 50.0, a figure that separates expansion from contraction.

The overall private business activity contracts at a faster pace due to further contraction in the service sector activity and a slowdown in the manufacturing sector.

The Composite PMI contracts further to 49.4 from 49.7 in May. The Manufacturing PMI drops to 53.1 vs. 53.6 estimates and the prior release of 53.9.

“A disappointing June ‘flash’ PMI indicates that the economy contracted for a second successive month, albeit at only a 0.1% rate and merely flat-lining over the second quarter as a whole. “Price pressures remain elevated as companies point to the energy shock and supply squeeze from the war in the Middle East as exacerbating existing cost pressures from government policies," Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said.

Market reaction

The selling pressure on the British Pound (GBP) extends against the US Dollar (USD) after the UK PMI data release. At press time, GBP/USD trades 0.26% lower at around 1.3215.

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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