Purchasing managers' surveys for September were encouraging, with further gains in services output and new business offsetting slippage in the corresponding manufacturing indices. A weighted average of services new business and manufacturing new orders is only slightly below its long-term average, supporting hopes of GDP growth of 2% annualised or more during the second half – see first chart. (The rise in the PMI indicator had been foreshadowed by recent better corporate earnings news – see previous post.)
The suggestion that the recovery is being led by services rather than manufacturing – in contrast to widespread expectations of "rebalancing" to be induced by a plunging exchange rate – is supported by the CBI's quarterly surveys of financial services, business and consumer services and manufacturing. The balance of manufacturing firms expressing greater optimism has recovered to the middle of its historical range but the corresponding balances in the two services surveys are at multi-year highs – second chart.
