What did we learn about manfuacturing from May's PMI?

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The first manufacturing indicator of the month – the UK Purchasing Managers’ Index (PMI) is in.  The headline number was reassuring positive, continuing the trend of overall activity expansion of the past 10 months. While there isn’t exactly breaking news in the data, here are 7 questions answered….

Where’s the good news coming from?


In short, everywhere. Expanding production is being buoyed by decent demand in the domestic supply chain and solid orders from overseas markets. 

Are you sticking with the story that the positive export picture isn’t just about exchange rates?

Yip.  A peek at the PMIs across the English Channel confirms that exporters around Europe are experiencing a similar pick up in sales on the back of stronger global trade. The eurozone PMI showed new export orders (including intra—EU trade) hitting a 73-month high.


So, all sectors in manufacturing are benefitting too?

More or less, the UK PMI noted that expansion in production and new orders were reported across all sub-sectors – consumer, intermediate and investment goods. But the companies in intermediate goods were leading the pack.

And what does the survey say is happening to prices?

Output prices are still rising – at a slower pace in the most recent survey, but that’s still pretty rapid compared with the recent past. This is still mainly a commodity price / exchange rate story, but interesting to note some companies pointing to strong demand conditions providing greater pricing power.

More sales, more capacity needed. How is that being met?

Again with more people. Reported jobs growth is the fastest in almost three years – not out of line with the vacancy numbers on official statistics. Unfortunately what we don’t know from the PMI is whether this additional recruitment is a complement to, or substitute for, investment in new assets.

Right – that might not be so good for productivity?

Nope. But as I said there’s no breaking news in the today’s data.

But this all stacks up with EEF members’ view of trading conditions at the moment?

Not so fast. Our 2017q2 Manufacturing Outlook, including our latest forecasts will be out on Monday.   


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Chief Economist

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