The Chartered Institute of Purchasing & Supply and Markit Â monthly Purchasing Managers Index (PMI) has shown a robust jump from 54.5 in January to 58.5 in February. Anything over 50 is in positive territory. This coupled with favourable manufacturing figures has been hailed by many as proof positive that we are now on the march forward.
This index jump is the largest one month gain for ten years and is at the highest level since January 2007. The FTSE and sterling both rose on the news.
David Page of Investec said that this showed that the UK services sector is in ‘rude health. The senior UK economist at Capital Economics, Vicky Redwood, said it suggested that the biggest part of our economy was back on track.
But there are those that urge caution.
Charlie Mayfield, the Chairman of John Lewis has declared that the UK’s emergence from the deepest recession since the Second World War is a false dawn. He says that it has cost a lot of money to get us out of it and we haven’t started to repay it yet.
Colin Ellis, an economist with Daiwa Capital Markets Europe has also urged caution against using one month’s data as the herald of renewed good times.
One swallow does not a summer make. We need to see a flock of positive figures like this before we can truly believe that the UK economy is on the real road to recovery.
The MPC meet later today and the general feeling seems to be that rates will stay as they are (of course) and that further quantitative easing will continue to be ‘paused’ at Â£200 billion, i.e. kept at the ready.
As Colin Ellis pointed out, PMI data has been misleading in the past. It pointed to a sharp upturn in 2009, which never came about.