Week ahead 3 January

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A busy first week back with the full breadth of PMI releases – manufacturing, services and construction.

Manufacturing PMI

So, firstly a quick recap. The indicator tanked in the immediate aftermath of the Brexit vote to a three year low of 48.3, before seeing a strong rebound in August. Since then it has stabilised at relatively high levels, well above the 50 no change mark. We expect this recent trend to be maintained, with December’s indicator once again printing above the 50 no change mark as beneficial exchange rate effects begin to filter through into high value sectors, as well as enduring healthy demand conditions across Europe. Ongoing price pressures from the weaker pound will be of concern to manufacturers in the New Year however, as rising input costs put pressure on margins and prices.

Services and Construction PMIs

The dominant services sector has seen a similar post Brexit story with indicator levels printing well above the 50 no change mark. A strong labour market as well as robust retail sales in December are likely to see the indicator at least holding onto its level above 50. The construction sector has had a rockier ride but recent indicator recordings point to a relatively healthy end to 2016.

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