UK: Services activity unsustainably strong - SocGen

In view of the analysts at Societe Generale, the UK services PMI has surprised us all and after the immediate rebound in August from the post-vote dip, it has not only consolidated that recovery but also made significant further gains in October and November to reach 55.2, the highest level since January.

Key Quotes

“What is more, this PMI is an activity or output index which fits well with the higher level of orders seen in the post-vote period.”

“The strongest performing part of the economy in the second half of this year has been the consumer sector which might then be thought to provide the obvious explanation of the strength of the services PMI. However, the flaw in that argument is that the services PMI excludes distribution - a key part of consumption.”

“In the absence of that explanation, we struggle to believe that such an elevated level of the PMI is sustainable and so expect some slippage in December from 55.2 to 54.5.”