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UK Services PMI Showed Strong Improvement: Is Confidence Growing?

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UK Services PMI

According to a report by Markit Economics, the final UK Services PMI (Purchasing Managers’ Index) was 55.2 in November 2016 compared to 54.5 in October. The figure beat market expectations of 55.0.

Improvement in the UK Services PMI indicates that there was an improvement in the business condition in November. New business orders and export orders rose that month. The PMI figure was the highest since January 2016.

In an earlier series, we saw that the UK’s third-quarter GDP surprised the markets. According to a report from the United Kingdom’s (EWU) Office for National Statistics, economic growth was 0.50% in 3Q16. That beat the market expectation of a 0.30% rise. But in 2Q16, GDP rose 0.70%.

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In 3Q16, the services sector contributed the most to the UK’s GDP compared to the industrial sector. The contribution of the services sector has been increasing gradually. So a rise in the services PMI is an important indicator that confidence in the economy is gradually improving. However, the fear of the United Kingdom leaving the Eurozone (EZU) (IEV) (HEDJ) is still there.

UK-based services sector firms such as Barclays (BCS) and the Royal Bank of Scotland (RBS) rose 0.76% and 2.6%, respectively, on October 27, 2016, after the GDP was announced.

In the next part of this series, we’ll look at the China Services PMI for November 2016.

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