MacroScope

Take with a pinch of salt economists who say Tuesday’s strong UK services PMI  might persuade the Bank of England to hold off from restarting its printing presses this week.

BoE policymakers been perfectly willing over the last few years to vote in favour of more asset purchases after a rise in the services PMI number.

Only the last decision for more quantitative easing — July 2012 — came after a decrease in the services PMI’s main index. While members of the Monetary Policy Committee rely on the PMIs as a monthly gauge of economic activity, it’s clear the surveys can’t be read as any proxy for policy decisions.

The outcome of Thursday’s meeting still hangs in the balance.

Graphic by Vincent Flasseur

It’s a report that gets little attention normally (We at Reuters geek out on Fed data a lot, and even we don’t write a story about it). But an unusually sharp contraction in the Richmond Fed’s services sector index for July caught the eye of some economists. The measure took a nosedive, falling to -11 this month, the lowest in over two years, from +11 in June.

Tom Porcelli at RBC says the plunge in new orders was downright scary:

Richmond Fed manufacturing got absolutely walloped in July. In fact, the all-important new orders component sank to an abysmal -25 from -7 in June and -1 two months ago. This is by far the weakest print since the recession. In fact, at no point has this metric been this low when we have not been in a recession.

To be sure, the data capture only two cycles prior to this one, but this doesn’t take away from the fact that the recent print is suggesting things could be much worse than advertised. We continue to hear how this year is “2011 all over again”, yet the data suggest it is materially worse.