A new month is starting? You know what it means

First working day of the month? Oh well, you should already know that this means. Manufacturing PMI is going to be released.

On Wednesday, we will have the first indication on how manufacturers have started the second half of the year. In June, manufacturing PMI was at 54.4 almost unchanged from the 54.3 registered in May. However, after the shock related to the bad performance of April in terms of output (-1.4% in the month) and the very weak bounce back registered in May (+0.4% in the month), we are still waiting to see if manufacturers will be able to react to a weak first half of the year. Markets expect a stable PMI but US tariffs, the end of the weak Sterling effect and the still very uncertain Brexit process, may be a big drag in the next few months.

The next day, as always, is dedicated to construction PMI. In the last three months, PMI readings were well over the 50 threshold and the “hard” data showed a significant uptick in activity in May (+2.9% in the month). However this was the reflection of the very bad start of the year with big disruption caused by the collapse of Carillion and bad weather. The sector may continue to recover the ground lost, but it’s not a quick process and it might still take several months.

On Friday, service PMI will complete the three days of leading indicators. Here too the last three readings have seen a quite solid uptick after March’s weak result. After struggling in the first quarter, services had a good run in the second quarter also thanks to the very good weather, the royal wedding and the exciting World Cup. The sector should contribute strongly to GDP in the second quarter, however consumer are still not too confident in spending big money. Indeed the latest retail sales release (data for June) indicated how weather and football only pushed up food & drink sales.

Super Thursday: let the excitement begin

Nothing is better than the GBP/USD exchange rate to see what the markets expect in terms of rate rises. The last month has been quite a roller-coaster with the exchange rate pointing towards 1.34 at the beginning of the month, then going below the 1.30 and now stable around 1.31. The MPC decision won’t be an easy one. Recent data have been a mixed bag with slowing inflation, slowing earnings, a GDP pointing to a decent but not amazing growth in Q2 and a labour market which is getting tighter and tighter. Aside from data, the Brexit process is not going smoothly and the possibility of a no-deal scenario and a hedge cliff in March 2019 is getting real and the Bank is clearly taking this into consideration.

On Wednesday Martyn will give you even more info and data about it.

Have a great week!