Recovery in PMIs eases fears of continued slowdown

Following a downward revision to quarterly GDP growth in Q4, from 0.5% to 0.4%, a deterioration in all three of the headline PMI balances in January raised concerns that growth had continued to slow at the start of the year. But those fears were assuaged by a stronger set of survey data for February. Admittedly, the manufacturing PMI fell again. But that was more than offset by the strongest reading since October for the services sector, which accounts for the bulk of economic output, while the construction sector PMI also staged a rebound. That left the all-sector activity index consistent with quarterly GDP growth holding steady at 0.4%. Admittedly, the February survey was conducted ahead of the recent bout of bad weather. But while the retail sector is likely to have suffered, we suspect that much of the lost ground can be regained in March. What’s more, electricity and gas output will have received a sizeable boost.