UK and eurozone PMIs paint picture of modest growth

Pan-European manufacturing sector sees upturn, but UK’s dominant services sector growth slows ahead of July election.

23 May 2024

UK Services PMI (Purchasing Managers’ Index) data for the month of May came in at the bottom end of forecasts at 52.9, still in expansionary territory but notably the lowest reading in the last six months. This does not auger well for the broader economy if the dominant services sector is genuinely starting to slow, which this data release points to. On the flip side, manufacturing PMI data showed a surprise move into expansion with a reading of 51.3, marking an end to the long contraction seen in this sector since August 2022. A similar story is being seen across the eurozone with Services PMI showing less bullish expansion while manufacturing (although still contractionary) recording better-than-expected momentum.

Encouraging signs for both the Bank of England (BoE) and the European Central Bank will be that inflationary cost pressures have started to show signs of easing across the board, and by implication, inflationary concerns are dissipating. Sadly, that does not mean rate cuts are round the corner as we have seen both central banks walking back the more bullish expectations for policy changes that markets were pinning their hopes on at the start of the year. With the UK now in an election spin cycle, it is difficult to see the BoE gate-crashing politics until the election is over – a pity for PM Sunak, whose time at the top of politics is surely coming to a hasty conclusion.