The continued rise in the composite PMI to its highest point since Q3 last year supports our view that activity will pick up again this quarter. Today’s flash estimate showed that the manufacturing PMI fell from 49.6 to 48.8, whereas the services PMI rose sharply from 50.9 to a four-month high of 52.7, leaving it far above its historical average of 49. As a result, the composite PMI rose from 50.5 to 51.1, the highest it has been since September last year. While the composite PMI has been a poor guide to GDP growth in recent quarters, on past form it’s consistent with GDP rising this quarter by around 1.0% y/y. We think that this will understate the strength in activity as our own forecast points to GDP growing by a robust 1.8% y/y this quarter instead due to base effects from the sharp plunge in Q1 last year.
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