Does the PMI suggest that the IoP had us fooled?

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The PMI has been pretty positive over the last few months

Today’s manufacturing PMI hit an eight-month high of 54.4, marking two years of expansion in the sector. This rounds off a good quarter for the sector: the average PMI reading for the first quarter of this year is at its highest level since 2014 Q2 and a strong domestic market is now being complemented by a modest pickup in export growth. The pick-up in orders will have been aided by strengthening activity in much of the eurozone.

With the employment outlook remaining positive and other data confirming a solid performance for productivity and investment growth in 2014, manufacturing continues to look well placed to support economic growth in the year ahead.

This is in contrast with the IoP…

This good news from the PMI doesn’t quite tally with the official statistics we’ve seen so far in 2015. As George blogged, the IoP showed that output in manufacturing fell in January. While this was mainly on the back of weakness for those manufacturers in the oil and gas supply chain, it does show something of a weaker picture than the PMI is painting.

April Fool!

Manufacturing did have a weak start to the year, but the Index of Production may yet have fooled us. Today’s PMI marks the 24th positive month for manufacturing sentiment, consistent with many other manufacturing surveys, including our own.

It’s worth noting that there is some weakness in the oil and gas supply chain, and there are a number of challenges still facing manufacturers. 2015 won’t be all plain sailing – and there may yet be other months when the IoP and PMI point in opposite directions – however the overall picture remains robust. We expect manufacturing output to grow 1.7% this year. 


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