The UK’s figure from Markit’s April purchasing managers’ index (PMI) surprised analysts, as the score for the whole economy rose to 59.2, the first increase in half a year. Some economists had expected the economy’s rapid growth to moderate, but the survey suggests it is continuing.
Robert Wood, chief UK economist at Berenberg says that the unexpectedly strong reading is an indicator that an interest rake hike might soon
be appropriate. “The composite PMI rose more than one point this month and signals around five per cent annualised GDP growth”.
He added: “We expect above-trend growth of 3.1 per cent for 2014 and 3.3 per cent for 2015. Record low interest rates are unnecessary.”
Both the overall growth and hiring intentions of UK firms have now risen for 16 consecutive months.
The figures for last month also point to a robust expansion across the Euro area, with a score of 54 – the highest since the quickly-reversed decision by the European Central Bank (ECB) to hike interest rates in mid-2011.
Every major economy recorded an improvement, a rare event for the region. Ireland and Spain’s figures were particularly strong, at their highest levels in nearly eight and seven years respectively. France, which has regularly lagged the other economies, was also recording weak growth.
“Given the various headwinds to Eurozone sentiment and growth from jitters and geopolitical tensions elsewhere in the world, soft export growth and a strong currency, the Eurozone shows remarkable resilience,” added Evelyn Herrmann, European economist at BNP Paribas.
However, credit ratings agency Fitch warned peripheral Eurozone economies their recent progress – and ratings upgrades – could be reversed if they slow their economic reforms and fail to cut borrowing further.