Economic Highlights

The final PMI prints for July were strong, with the service and composite figures at 56.5 and 57 respectively. In a normal environment this would indicate a significant pick-up in economic activity. However, given the macro uncertainty, a read through to the GDP data is less certain at this time. The BoE’s decision to leave base rates and its QE programme unchanged was not unexpected, however given the uncertain backdrop, there remains the potential for further stimulus later this year.

The ISM data also showed a recovery, with the service sector print at 58.1 versus a consensus figure of 55. The US labour showed signs of recovery, with the nonfarm payroll printing at 1.7m versus a consensus figure of 1.4m. The unemployment rate however remains in double digit at 10.2% -which was somewhat better than the consensus of 10.6%. The labour force participation rate however remained fairly static at 61.4% -suggesting the labour market is likely to require more time to repair.

Similar to the UK data, the composite Eurozone PMI data showed a bounce back in activity with a print of 54.9. Interesting there remains a divergence at the country-level, with both Germany and France showing a sharper bounce in activity versus Italy and Spain.