June 2018 UK Markit/CIPS services PMI 4 July 2018

  • Prior 54.0
  • New orders 55.3 vs 53.1 prior
  • Markit says services points to Q2 GDP of 0.4%
  • Robust and accelerated upturn in business activity
  • New work increases at fastest pace for 13 months
  • Input cost inflation intensifies in June

A solid beat and the news is bullish underneath.

Darren Brock of CIPS said;

“Exceeding expectations the sector ended on a positive note at the end of the second quarter, buoyed up by the fastest rise in new orders in over a year and the strongest overall performance since last October. However the downside of this achievement came in the form of relentless capacity difficulties as business backlogs rose to an acute degree, not seen for around three years. Not even the minor uplift in hiring could alleviate the problem as salary pressures and the struggle to find skilled hires caused firms to hesitate to increase staff numbers further. Add increased costs for fuel, and the picture emerges of a sector experiencing the sharpest cost inflation since September last year, as well as the confidence to pass on these additional costs to their clients to maintain their margins.

Optimism about the future remained fairly solid, possibly lifted by the effects of the warm weather. So, the sector is moving in the right direction despite the background impact of Brexit still in evidence and larger corporates holding back from placing big ticket orders.”

Still some caution needed but it’s going the right way. Will it continue enough for the BOE to hike? We’ll find out next month. For now, hike odds have flipped to 51.7% from 49.9% prior to the data.

Ryan Littlestone

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