Thursday, January 5, 2017
Brexit, what Brexit? The British economy is 'exceeding all expectations' post-referendum
Every single sector of the British economy is now doing better than expected and has defied the forecasts of economists in December, according to the latest services PMI data from IHS Markit on Thursday.
It completes a trilogy of much better than expected post-Brexit economic figures released this week, following strong growth in the manufacturing and construction sectors.
The services sector — which includes everything from banking to waitressing — drew a reading of 56.2 in the month, that's compared with a 55.1 reading in December, and ahead of the flash estimate of 54.7.
That follows on from a big manufacturing beat on Tuesday, when the PMI rose to 56.1 in December from 53.6 in November. That was well above the 50-mark separating growth from contraction and beat forecasts for 53.1 by economists in a Reuters poll.
Construction PMI was also higher than forecast when released on Wednesday, growing for a fourth consecutive month in December, continuing to shake off the recession that plagued the sector in early 2016.
Thursday's services numbers from IHS Markit provided the best reading for the sector in 17 months.
"Exceeding all expectations, the year ended on a high for the service sector, which rounded off the strongest quarter in 2016 as new business and employment levels continued to grow. The overall rate of activity growth accelerated for the third successive month to the fastest since mid-2015.
"Keeping up with levels of new work and increased activity, additions to the workforce were maintained for the fifth month running. Though, overall, 2016 proved to be the weakest year for employment growth since 2012," David Noble from the Chartered Institute of Procurement & Supply said in a release.
"The final batch of UK PMI survey data for 2016 from IHS Markit and CIPS signalled that the dominant UK service sector expanded sharply in December, rounding off the strongest quarter of the year," IHS Markit said in a statement.
"The rate of expansion of activity accelerated for the third month running to the sharpest since July 2015, fuelled by stronger growth in new work. Employment rose at a pace unchanged from November’s seven-month high, and sentiment towards the 12-month outlook strengthened despite ongoing uncertainty regarding Brexit and European elections," it continued."
The purchasing managers index (PMI) figures from IHS Markit are given as a number between 0 and 100.
Anything above 50 signals growth, while anything below means a contraction in activity — so the higher the number is, the better things look for the UK.
Here is IHS Markit's chart of the PMIs longer-term trend (note the massive pick up since July):
On Thursday, Morgan Stanley, one of the world's biggest investment banks, said that it is "eating humble pie" about its post-Brexit economic forecasts. The American bank was one of the more pessimistic financial institutions after the referendum, predicting a Brexit induced recession and a long-lasting slowdown in the British economy off the back of diminished investment and weakening consumer demand. It has since changed tack on the back of data like today's.