This week is dominated by PMI data, with manufacturing first to take the stand.
The UK manufacturing PMI will be out on Tuesday. Last month we got some pretty positive news as October’s manufacturing PMI jumped up to 55.5, its highest level since June 2014. This was the first manufacturing data we had for q4, and gives some reason for optimism about the sector after official statistics have shown that output contracted in each of the first three quarters of this year.
Last month’s PMI saw domestic demand acting as a strong spur, once again, but manufacturers also reported a pick-up in export demand from the Middle East and the US. However, with many of the factors that have dragged down manufacturing growth this year still present, will November’s PMI point to further improvements, or will October’s bounce prove to be a blip?
Eurozone manufacturing PMIs
Also out on Tuesday is the Eurozone manufacturing PMI, which also improved in October, reaching 52.3. All economies covered by the measure – except Greece – saw their manufacturing sectors report expansion in October. Since then, we’ve had the flash PMIs for November, which point to the indicator coming in at a 19-month high. It’s worth noting, as well, this month the German IFO report of business expectations came in at its highest level since January 2014.
Continued improvements in Europe would be good news for UK manufacturers, as Europe remains our largest export market.
The other PMIs
Later this week we will also see PMIs for Services and Construction, both key components of the UK economy.
Last month’s construction PMI was buoyant, showing a rebound in new order growth and the fastest pace of job creation for almost a year. This is despite the most recent official data, which shows that construction output fell 2.2% in q3. So, is a turnaround for the sector on the books? It’s one to watch for manufacturing sectors such as non-metallic minerals and rubber and plastics, where construction is a key customer.
Services takes the biggest chunk of the UK economy. October’s PMI strengthened for the first time in four months, although still points to relatively subdued growth compared with recent trends. In addition, new business remained at the same level as September’s 29-month low. Nonetheless, official statistics show eleven consecutive quarters of growth for services output, and a slight acceleration in growth in q3 compared with q2. Will q4 see continued improvements? Or will the weakness in new business orders start to have an impact?