UK ‘FLASH’ PMIs FOR JULY DON’T MAKE GOOD READING

A special edition of ‘flash’ UK Manufacturing and Services PMIs suggest the UK is heading for recession. The research was carried out post referendum and may also reflect a hint of panic as well as falling confidence. Whether this mood continues to prevail remains to be seen. Certainly the evidence provided by Bank of England’s agents throughout the country does not reflect the doom and gloom seem in the July PMIs but this survey will provide some grist to the MPC’s mill when they meet again in a few weeks’ time. The governor, having signalled a rate cut in July only to disappoint the markets, would seem to be under even more pressure to take strong action in August and a 25 basis point cut in Bank Rate is widely expected. More important will be the other measures that are set to be announced, measures which may have a more significant potential fillip to the economy that a rate cut which will have limited effect on the real economy other than reduce bank earnings. As for an increase in QE, many market participants remain sceptical as to whether such a move would be beneficial in the short term and may even load further problems for the future when QE is eventually unwound. Interesting times indeed.

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