PMI - Springing higher

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Yet more positive data out this morning, with the April manufacturing PMI rebounding to a five-month high on the back of rising new orders and solid employment growth. Here are the key points:

  • PMI rises to 57.3, from a revised 55.8 in March
  • Twelfth successive month of improving business conditions
  • Output sub-index hits eight-month high
  • Growth in new orders from domestic and export markets
  • Twelfth successive month of job creation
  • Second consecutive monthly fall in input costs

Manufacturing PMI(50 = no change)

Source: Markit/CIPS

Up and up

The April data indicate that the robust upturn in manufacturing is continuing apace, with the PMI well above its long-term average of 51.4. Manufacturing was one of the UK's star performers in the opening months of 2014, with output growth of 1.3% outpacing the rise of 0.8% in whole-economy GDP. The pick-up in the April PMI to a five-month high, and a healthy trend in incoming orders, puts the sector firmly on course to expand for a fifth consecutive quarter in Q2.

Markit noted that the rate of employment growth in April was close to a three-year high, implying that manufacturers are currently creating around 10,000 jobs per month. Operating margins are improving in response to the subdued trend in input costs (partly reflecting the strengthening of sterling) and a demand-driven pick-up in selling prices. In terms of sector activity, growth was strongest in consumer and intermediate goods, while orders for new investment goods were more lacklustre.

Broadening of demand?

The domestic market remains the dominant driver of manufacturing activity, although there were encouraging signs in the PMI data that the gradual revival in Eurozone demand is beginning to feed through to manufacturers' export order books. We anticipate a gradual strengthening in the global growth picture as the year progresses. Alongside steady momentum in the UK economy, we forecast manufacturing growth of at least 3% in 2014, the fastest rate of expansion in four years.

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