The official PMI reading for the service sector was 53.5 for August, down from 53.9 in July, according to the NBS. This raises uncertainties about the performance of US August nonfarm payroll report. We now forecast third quarter GDP growth of 0.3 per cent quarter-on-quarter’. Should the wage growth be positive in August, US economic outlook will keep upbeat. A number above 50 indicates expansion while below 50 shows contraction.
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United Kingdom manufacturing activity rebounded at the joint-fastest pace in a quarter of a century in August amid a jump in output and new orders as the initial shock of the Brexit vote faded.
Purchasing managers’ expectations for business conditions were the most optimistic in about a year, with the index measuring expected business conditions in six months’ time rising to 61.5 index points from 55.4 previously.
Most economists said it was too early to say if the rebound would be sustained, while the rise in input prices to a five-year high suggested inflation would pick up sharply. A strong dollar had also lowered overseas sales and made imports cheaper.
The slump in sterling to 31-year lows following the European Union referendum result made British products cheaper, boosting export orders to a 26-month high, with increased demand from the US, Europe, China, South East Asia, the Middle East and Norway.
The Office for National Statistics (ONS) confirmed last week that gross domestic product (GDP) grew by 0.6% in the second quarter, up from 0.4% in the first three months of 2016.
August’s monthly surge was the joint largest in the manufacturing survey’s near 25-year history and beat all forecasts in a Reuters poll of economists.
A food and beverage respondent said new product distribution was increasing, while another manufacturer said medical devices remained a strong area.
But despite the upbeat United Kingdom data, separate figures from Markit today revealed that across the eurozone, manufacturing levels fell to a three-month low last month, after reaching an annual high in June.
Markit, which compiled the PMI said, companies had reported restarting work which they had put on hold in July, as their clients saw business starting to return to normal. USA manufacturing contracted in August for the first time since February, as new orders and output plummeted and factories cut jobs, according to information released Thursday by the Institute for Supply Management. However, the rate of contraction eased to the weakest since February, Markit reported.
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The Bank of England has provided a range of stimulus measures to help the economy, which may have supported business confidence.
