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Home » Online Forex Trading Blog » Positive PMI Report May Hold UK Recession Off

Positive PMI Report May Hold UK Recession Off

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Taking a page from the US consumer, British consumers bucked current economic data and produced some unexpected PMI gains for February. The services sector, which constitutes three-fourths of UK GDP, grew at its fastest pace in five months and may well have lifted the onus of the country’s third recession in four years from the economy.

The country’s Purchasing Managers Index (PMI) rose in February to 51.8, surpassing January’s mark of 51.5 in January. The median economist PM forecast from analysts was 51.0. The report comes on the heels of the worst construction PMI in three years. After the economy shrank in the fourth quarter 2012, GDP seemed poised for another fall in the first three months of 2013. Those fears may be subsiding based on these stronger than expected numbers.

The Markit PMI report neither includes data regarding the retail sector nor data regarding the public sector. However, Markit reports that optimism about future business activity is strong, reaching a nine-month high at 67.6 up from 67.2 in January.

Inflation has cut into profits in the service sector but transport, storage, communication services, financial intermediation, business services, personal services, computing services, hotels and restaurants all reflect encouraging activity.

To add support to the PMI, the British Retail Consortium reported the best sales volume in more than two years. Most surprising is a boost in home sales. These purchase shave led to an increase in the sales of furniture, home goods and electrical goods.

The Bank of England

The dim construction report led to speculation that the Bank of England would resort to another round of quantitative easing, raising inflation concerns and devaluing the pound. Prior to the PMI report, Reuters analysts estimated there was a 40 percent chance of another easing initiative. The jury is still out on this verdict.

33 Percent of Brits Support Anti-EU Policy

In news that looks discouraging for Prime Minister David Cameron, a poll by YouGov indicates that there is growing support to pull out of the EU. Cameron has promised an up-down vote in 2017. Cameron’s Conservative Party appears to be losing ground to opponents of the EU treaty.

The YouGov poll suggests that Cameron waited too long to announce the long-awaited vote.  Liberal Democrats are poised to take a leadership role in Parliament and at the top. Led by Deputy Prime Minister David Clegg, Liberal Democrats received the biggest share of supp0ort in the YouGov poll.

Bonus Controversy

Recent EU legislation may well be the last straw for Britain and the EU.  Chancellor George Osborne has apparently failed in his efforts to block restraints on earning of bakers, investment bankers and risk takers. Although Germany asked a review of the new agreement which would limit the amount of bonuses bank leaders could capture, the majority of EU members states support the new controls.

Unlike in the US, the EU opposes commissions earned through risk taking that would require public bailout if the gamble failed. Commissions revealed in the wake of the 2008 meltdown offended the senses of most Europeans.

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About the Author -

Hiland DoolittleHiland is a professional writer with extensive entrepreneurial experience. He is a graduate of St. George’s School Newport, RI and the State University of New York at Albany where he majored in history. He has been active in the real estate business for 30 years and has founded and sold several businesses. Hiland currently writes for several financial sites and is a published author of the novel The Last Parade. He has recently completed a manuscript for a children’s book entitled Sami and The Minnow Man.

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