UK PMIs hint at fairly modest bounce following 1Q GDP – ING

FXStreet (Barcelona) - James Knightley, Senior Economist at ING, reviews the UK May services PMI data release and further comments shares the GDP growth forecasts for 2Q15.

Key Quotes

“The UK’s May service sector PMI has come in at 56.5 versus 59.5 in April. This is a disappointing outcome with the market looking for 59.2 based on consensus surveys. With the manufacturing index rising to 52.0 from 51.8 and construction rising to 55.9 from 54.2 this leaves the UK’s composite purchasing managers’ index at 55.8 versus 58.4 previously. This is the weakest reading since December.”

“The survey compiler suggests that this level of activity is consistent with GDP growth of around 0.5%QoQ. Nonetheless, the survey did suggest that labour demand remains strong and price pressures are increasing.”

“Moreover, business optimism improved in the wake of the General Election, which suggests that the indices can improve in coming months.”

“Indeed, with retail sales having bounced strongly and industrial production looking in decent shape we are predicting GDP growth of 0.7%QoQ in 2Q15.”