The index swung back above the 50-point threshold dividing an expansion in activity from a contraction. After both stabilized this spring, the index increased but recently took a hit with the decision of voters in the United Kingdom last month to leave the European Union.
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The services PMI, meanwhile, nudged up to 52.9 in July from 52.8 in June and the flash estimate of 52.7.
The expansion was driven mainly by a rebound for factory output that followed 16 consecutive months of contraction.
Surveys of confidence and business activity have slumped since Britain’s decision in June to quit the European Union, and the BOE is expected to respond with fresh stimulus when it announces its next policy decision on Thursday.
The Caixin composite index suggested manufacturers and service providers in July chose to control costs by cutting employment.
“The Indian service economy started the second semester on a solid footing, posting its strongest performance since April and thereby indicating that underlying demand conditions remained reasonably firm”, Pollyanna De Lima, economist at IHS Markit, was quoted as saying in the report.
Last month marked only the second time in the recovery since early 2013 that the UK’s manufacturing PMI fell below 50, Markit said.
“Admittedly, unresolved structural issues mean this pick-up is on borrowed time and we still expect growth to slow again next year”, said Julian Evans-Pritchard of Capital Economics in a report. The services activity fell to the lowest level since March 2009 in July.
The single currency showed little reaction as EUR/USD held just above 1.1200, while German bunds were also little changed with the Eurostoxx index down around 0.40 percent. Despite coming in slightly weaker than expected, the data show that manufacturing purchasing managers remain optimistic about the health of the USA economy, and stands in contrast to last week’s relatively lackluster GDP data, which tends to be a lagging economic indicator. They expect the BOE’s Monetary Policy Committee to reduce its key rate to 0.1 percent from 0.5 percent now, with cuts this week and in November.
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A 0.6% decline in spending for private construction pulled down the overall June figure, while residential construction was almost the same as it was the month before.
