The Week In Hindsight; 04 July 2014
Although later than last year, UK PMI surveys reversed their YTD decline last month as forward expectations among Britain’s purchasing managers staged a rebound.
The Markit Manufacturing PMI came in ahead of expectations at its highest level since December, while the Markit Construction PMI also excelled againsts expectations with a print of 62.6 VS expectations of a decline from 60.0 to 59.7.
After last year’s rapid recovery in forward expectations the barometers had spent much of 2014 retracing back from their earlier peaks, causing some observers to speculate early on that the recovery was heading for the rocks.
The next major event in the calendar for the UK economy is the release of manufacturing production numbers next Tuesday, which are followed on Thursday by the Bank Rate and Asset Purchase Facility announcements.
Over on the other side of the Atlantic, economic data released on Thursday showed the US unemployment rate reaching 6.1% during June, the lowest level since before the financial crisis.
In addition to the reduction in unemployment, non farm payrolls expanded by 288k for the second time in 2014, which is a level not seen since the 1990’s.
While overall US growth projections have been revised lower for 2014, due to the severer than expected nature of the Q1 contraction; the long anticipated economic rebound has finally arrived if this week’s data is anything to go by.
This bodes well for corporate earnings over the medium term as well as for savers seeking further clarity on interest rates. Should such levels of activity be maintained throughout the majority of H2 this year, then this would bolster expectations for a rate rise toward H2 2015.
The DOW JONES breached the 17,000 level for the first time in history in response to the data, while the FTSE 100 extended earlier gains to close 0.79% higher for the day and 1.6% higher on the week.