This week we have some important PMI releases, however the main focus will be concentrated on the Bank of England Monetary Policy Committee meeting.
On Wednesday the Purchasing Managers’ Index will give us an indication on how the manufacturing sector is performing. Recent months have seen strong PMI data, with a reading at 56.9 in August and a solid 55.9 in September (much higher than the long term average 51.7) which indicate a sector in expansion.
The “hard” data from ONS confirmed this trend with the manufacturing sector registering a positive month over month growth in the last 4 months. The first GDP release also confirmed how manufacturing has positively contributed to the better than expected GDP expansion in the third quarter of 2017 growing by 1%. Our Manufacturing Outlook is pointing to the same direction and we expect another good PMI performance.
Thursday will be the turn for the Construction PMI. The sector has struggled much more than the Manufacturing sector in recent months and the GDP release confirmed this.
In September the PMI figures show the first contraction (48.1) since August 2016. Lack of confidence about the future and weak clients’ appetite are the two main factors which are harming the sector.
Service PMI will be out on Friday. The “heaviest” UK sector has sent a few mixed signals over the last few months. Its good performance in Q3 helped GDP to expand more than forecast. The PMI figure was 53.6 in September so within the 53-54 range which characterized the last 5 months.
Bank of England decision
The Monetary Policy Committee will meet on Thursday. The expectation for a 0.25% increase of the Bank Rate are high, especially after the latest GDP release which should have cleared the doubts after some dovish comments from some BoE members. This would be the first Bank Rate rise in 10 years and it will restore the 0.5% level not seen since August 2016.
However it’s unlikely that the first rise would mean a starting point for a restrictive monetary policy cycle such as the one slowly happening in the US.