Service sector continues to thrive The UK’s service sector, which consistently represents at least 70% of the country’s economic output, saw its fastest growth in eight months, according to the latest figures from the Markit/Cips Purchasing Managers’ Index (PMI). The PMI reported that April saw their index rise to 59.5, up from the previous month’s 58.9 figure. Here any number above 50 represents growth in the sector. This sector has now seen sustained growth for the last twenty-eight months. April’s figures indicated the fastest rate of growth seen in services since August 2014, even though the industry recorded falling prices for the first time in six months. However, there was a strong caveat to this good news in that both the manufacturing and construction sectors continued to decline in April. Commenting on their findings, the Chief Economist of Markit, Chris Williamson, said: “The economy is showing robust growth momentum, expanding at a rate of 0.8% at the start of the second quarter.” Speaking just before the general election, he did, however, go on to add: “Rather than rebalancing towards manufacturing, economic growth has been increasingly reliant on the service sector and the consumer is having to drive growth as investment spending remains disappointingly weak amid heightened political uncertainty. “Prices are also falling amid signs of intense competition. The surveys are showing the steepest drop in average prices charged for goods and services since 2009, which will revive worries about deflation.” Given this sanguine scenario in relation to underlying inflation, the Bank of England is most unlikely to increase interest rates, from their historically low level, in the short-term. This should ensure that the UK can look forward to enjoying continued economic expansion in 2015.
Markets (May) (Data supplied by the Outsourced Marketing Department)
With some exceptions, equity markets globally fared well in May. Here in the UK the FTSE100 breathed a sigh of relief as election fears of a hung parliament receded and, helped by the CBI’s latest monthly indicator showing the best economic growth for a year, it managed a modest gain of 0.34%. Whilst off its recent highs, it closed the month on 6,984.4. The wider FTSE250 surpassed this with a 3.89% rise to 18,154.42 and the junior AIM market following suit with a 2.57% improvement to finish at 772.6. Across the pond the Dow Jones Index trod water closing May at 18,010.68 for a modest 0.95% gain, but the technology focused Nasdaq bettered that with a rise of 3.17% to 5,097.98. The Japanese market continued its five-month bull run with the Nikkei225 gaining another 5.34% ending the month on 20,563.15. The Eurostoxx50 index let the party down a little, as continuing worries of a possible Greek debt default and subsequent Grexit overshadowed the market. It finished at 3,570.78 to record its second monthly decline at 1.28%. The foreign exchange markets were subdued. Sterling weakened by 1.3% against the US Dollar to $1.52, but improved against the Euro to €1.39. The Euro therefore lost ground against the US Dollar as well, slipping 4.4% to $1.08. Despite increasing demand for jewellery and bullion across China and India, the Gold price saw little monthly movement, closing just 0.64% higher at $1,191.40 a troy ounce. Black gold – Oil, as measured by the Brent Crude benchmark, fell slightly in price to $65.30 a barrel. Although off 2.17% for the month, it still managed to close 5.1% higher over the last three month period. Download full report here