| Consensus | Actual | Previous | |
|---|---|---|---|
| Composite Index | 48.6 | 48.7 | 48.5 |
| Services Index | 49.2 | 49.5 | 49.3 |
Highlights
UK private sector activity was slightly stronger in October than previously reported, according to final PMI data released on Friday.
The composite index rose to 48.7, above the flash estimate of 48.6 and the September reading of 48.5. But the October result remains below the break-even level of 50, suggesting that the economy contracted last month, albeit at a slightly slower pace than in September. Manufacturing production and new orders both slumped in October, according to S&P Global, which publishes the data.
A slightly brighter performance from the service sector accounted for much of the upward revision. The service index rose to 49.2, bettering the flash estimate of 49.2 and the 49.3 reading of September. Nonetheless, the degree of optimism amongst service companies hit its lowest level of 2023.
Private sector employment fell for the second consecutive month, even in the previously resilient service sector. While the decline was modest, it was still the second-fastest decline since January of 2021.
The PMI employment reading may attract greater attention than in the past, given questions over the efficacy of official data. The UK's Office for National Statistics has downgraded its key labour data to"experimental" after a decline in response rates to its labour force survey forced the agency to cobble together estimates from alternative sources.
While UK economic activity may be contracting less rapidly than the eurozone the bloc's flash composite PMI fell to 46.5 in October investors are betting that the Bank of England has called time on its tightening cycle after leaving its benchmark rate at 5.25 percent for the second meeting in a row.
In fact, some dealers believe that the Bank could begin easing policy as soon as next summer, even though BoE Governor Andrew Bailey stressed that it's much too early to be considering rate cuts. Inflation fell an annual rate of 6.7 percent in September but remains more than three times the Bank's two percent target, leading three of the nine-member Monetary Policy Committee voting for a 25-basis point hike earlier in the week.
The PMI data take the UK RPI to minus 16 and the RPI-P to minus 27, meaning that the economy is underperforming market expectations.
The composite index rose to 48.7, above the flash estimate of 48.6 and the September reading of 48.5. But the October result remains below the break-even level of 50, suggesting that the economy contracted last month, albeit at a slightly slower pace than in September. Manufacturing production and new orders both slumped in October, according to S&P Global, which publishes the data.
A slightly brighter performance from the service sector accounted for much of the upward revision. The service index rose to 49.2, bettering the flash estimate of 49.2 and the 49.3 reading of September. Nonetheless, the degree of optimism amongst service companies hit its lowest level of 2023.
Private sector employment fell for the second consecutive month, even in the previously resilient service sector. While the decline was modest, it was still the second-fastest decline since January of 2021.
The PMI employment reading may attract greater attention than in the past, given questions over the efficacy of official data. The UK's Office for National Statistics has downgraded its key labour data to"experimental" after a decline in response rates to its labour force survey forced the agency to cobble together estimates from alternative sources.
While UK economic activity may be contracting less rapidly than the eurozone the bloc's flash composite PMI fell to 46.5 in October investors are betting that the Bank of England has called time on its tightening cycle after leaving its benchmark rate at 5.25 percent for the second meeting in a row.
In fact, some dealers believe that the Bank could begin easing policy as soon as next summer, even though BoE Governor Andrew Bailey stressed that it's much too early to be considering rate cuts. Inflation fell an annual rate of 6.7 percent in September but remains more than three times the Bank's two percent target, leading three of the nine-member Monetary Policy Committee voting for a 25-basis point hike earlier in the week.
The PMI data take the UK RPI to minus 16 and the RPI-P to minus 27, meaning that the economy is underperforming market expectations.
Market Consensus Before Announcement
No revisions are expected to the flash estimates leaving the composite output index at 48.6, barely changed from September's final 48.5.
Definition
The Services Purchasing Managers' Index (PMI) provides an estimate of service sector business activity for the preceding month by using information obtained from a representative sector survey incorporating transport and communication, financial intermediation, business services, personal services, computing and IT and hotels and restaurants. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting). The data are compiled by the Chartered Institute of Purchasing and Supply (CIPS) and S&P Global.
Description
Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the ISM non-manufacturing index in the U.S. and the S&P Global PMIs elsewhere, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.
The S&P Global PMI services data give a detailed look at the services sector, how busy it is and where things are headed. The indexes are widely used by businesses, governments and economic analysts in financial institutions to help better understand business conditions and guide corporate and investment strategy. In particular, central banks in many countries use the data to help make interest rate decisions. PMI surveys are the first indicators of economic conditions published each month and are therefore available well ahead of comparable data produced by government bodies.
The S&P Global PMI services data give a detailed look at the services sector, how busy it is and where things are headed. The indexes are widely used by businesses, governments and economic analysts in financial institutions to help better understand business conditions and guide corporate and investment strategy. In particular, central banks in many countries use the data to help make interest rate decisions. PMI surveys are the first indicators of economic conditions published each month and are therefore available well ahead of comparable data produced by government bodies.
