Strong services data for July indicates health in the sector

The services PMI for July came in at 60.2.

Market Economics has released the purchasing managers' index data for the services sector in the month of July. It shows a sharp increase in activity in the sector, dominant in the UK economy: the index stands at 60.2, well above the 57.2 forecast. It is the best growth services have seen since 2006.

The PMI is compiled from data contributed by purchasing managers across Britain, and values of above 50 represent increasing growth in the sector, while values below represent increasing contraction. A value of 60.2 thus represents extremely strong growth for the services sector; and, given the strength of that sector in the national economy, bodes well for overall growth in the third quarter of 2013.

The below chart shows quite how high the reading was, and also how well the PMI data – an incomplete but speedy measure based on survey data – tracks the ONS's official estimate of the sector.

Today's release follows that of the PMIs for the construction and manufacturing sectors, each similarly strong. The former came in at 57.0, up from 51.0 in June, while the latter came in at 54.6, up from 52.9 the month before. Both of those figures represent the fastest growth in their sectors for years, and indicated that the slump is well and truly coming to an end. Markit's chief economist, Paul Smith, says that the service sector "appears to have genuine momentum". "Although an early call on one month's data," he adds, "the forward-looking elements from the survey point to a further strengthening of GDP in Q3 as the UK heads towards 'escape velocity' and self-sustaining economic expansion."

Those forward-looking elements include measures of backlogs in orders, as well as questions of business confidence. Backlogs, which indicate pressure on companies to expand their production, had the sharpest rise since February 2000, and have now risen four months in a row. Business confidence also strengthened, to its highest level for over a year, although that still leaves it well below even the burst in optimism immediately following the recession, let alone the typical sensibility in the mid-2000s.

The pound saw a slight boost following the release of the news, rising against the dollar from 1.532 to 1.535.

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Why Podemos will defeat the Spanish Socialists

A new alliance on the Spanish Left will be stronger than the sum of its parts.

On Saturday morning, on a palm-tree lined promenade in the small city of Badalona in eastern Catalonia, a 38-year-old woman named Mar García Puig fanned herself with her speaking notes after taking her turn on the stage.

Until six months ago, Puig was a literary editor with no professional experience in politics apart from attending demonstrations and rallies. Then, in December, her life was transformed twice over. In the national election, she won a parliamentary seat for En Comú Podem, the Catalan regional ally of the anti-austerity party Podemos. Four hours after she learned of her victory, Puig gave birth to twins.

Fortunately Puig’s husband, who is a teacher, was able to take paternity leave so that she could take up her seat. In parliament, Puig “felt like an alien”, she told me over coffee. As it turned out, she had to give up her seat prematurely anyway – along with all the other Spanish MPs – when repeated attempts to form a government failed. So now, in the lead-up to Spain’s first repeat election of the modern era, to be held on 26 June, Puig was on the campaign trail once more in a drive to win a parliamentary seat.

The December general election was as historic as it was inconclusive, ushering in a novel political era in Spain and leaving the country with the most fragmented parliament in its history. Fed up with corruption, austerity and a weak recovery from the global financial crisis, voters punished the mainstream parties, ending the 40-year dominance of the conservative Partido Popular (People’s Party) and the centre-left PSOE (Spanish Socialist Workers’ Party), which have held power since the death of General Franco. Neither group was able to win an absolute majority as new parties from both ends of the political spectrum garnered support from disenchanted voters.

On the left, Podemos, which was only founded in March 2014 by the ponytailed political scientist Pablo Iglesias, won 20 per cent of the vote. Ciudadanos (Citizens), formed in Catalonia a decade ago and occupying the centre left or centre right, depending on which analyst you talk to, secured a 14 per cent share.

Despite having four months to form a coalition government, the two biggest political parties could not reach a deal. The People’s Party, which had implemented a harsh austerity package over the past five years, recorded its worst electoral performance since 1989, losing 16 percentage points. It still won the most votes, however, and Prime Minister Mariano Rajoy was the first leader to be asked by King Felipe VI to form a government.

By the end of January, Rajoy conceded defeat after the PSOE refused to join his “grand coalition”. The Socialists then failed in their own attempt to form a government, leading the king to dissolve parliament and call a fresh election.

Despite the inconvenience of having to campaign nationwide once again – and being away from her twins – Mar García Puig’s enthusiasm for her new career is undiminished. “In Spain there is a window of opportunity,” she said. “There is a receptiveness to politics that there wasn’t before.”

When the repeat elections were called, some questioned whether Podemos and its regional allies could mobilise its supporters to the same extent as in December. Yet Puig believes that the party’s appeal has grown further in the six months that the country has been without a government. “We are still new and Podemos has this freshness – it can still make people join,” she told me.

The following day, as the church bells rang at noon in the Basque city of Bilbao, crowds gathered for another rally. For protection against the sun, Podemos supporters had covered their heads with purple triangular paper hats displaying the party name as it will appear on the ballot paper: Unidos Podemos, or “United We Can”.

In May, Podemos entered into an alliance with Izquierda Unida (United Left), the radical left-wing party that includes the Communist Party of Spain, and which won 3 per cent of the vote in December. Izquierda Unida is headed by Alberto Garzón, a 30-year-old Marxist economist who, according to a poll by the state-run CIS research institute, is the most highly rated party leader in Spain. Unlike Podemos’s Iglesias, who can fire up a crowd and is seen by some as divisive, Garzón is a calm and articulate politician who appeals to disaffected voters.

Nagua Alba, who at 26 is Podemos’s youngest MP, said the new alliance would be stronger than the sum of its parts, because Spain’s voting system punishes smaller parties when it comes to allocating seats in parliament. “It [the alliance] will attract all those people that aren’t convinced yet. It shows we can all work together,” Alba said.

As part of the agreement with Podemos, Izquierda Unida has agreed to drop its demands for a programme of renationalisation and withdrawing Spain from Nato. The alliance is campaigning on a platform of reversing Rajoy’s labour reforms, removing the national debt ceiling, opposing the TTIP trade deal, and increasing the minimum wage to €900 a month. A Unidos Podemos government would attempt to move the EU’s economic policy away from austerity and towards a more expansionist stance, joining a broader effort that involves Greece, Italy and Portugal. It is also committed to offering the Catalans a referendum on independence, a move that the mainstream parties strongly oppose.

The latest polls suggest that Unidos Podemos will become Spain’s second-biggest party, with 26 per cent of the vote, behind Rajoy’s Popular Party. The Socialist Party looks poised to fall into third place, with 21 per cent, and Ciudadanos is expected to hold its 14 per cent share. If the polls are accurate, the PSOE will face a difficult choice that highlights how far its stock has fallen. It can choose to enter as a junior partner into a coalition with the insurgent left, which has politically outmanoeuvred it. Or it could decide to prop up a Partido Popular-led right-wing coalition, serving as a constraint on power. 

This article first appeared in the 23 June 2016 issue of the New Statesman, Divided Britain