UK Manufacturing PMI Strengthens
The headline Manufacturing PMI reading rose by 3.1% in April to hit 57.3, well above expectations. The increase was fuelled mainly by strength in new orders, driven by domestic and foreign demand. An increase in inventories of new purchases also supported the rise. Employment and suppliers’ delivery time were roughly unchanged over the month and therefore contributed little to the increase.
The HIS Markit press release noted that firms continue to be positive about the future with roughly 50% of respondents forecasting production volumes to be higher over the next 12 months. Less than 4% of respondents expect to see a decrease. Confidence here is linked to expected improvements in domestic and overseas demand as well as expected company expansions.
Input prices weakened significantly over April marking the third consecutive month of decline. There could still be strength in output prices as firms continue to look to pass through recent higher input prices though as input prices continue to fall, output prices should also start to come down.
Manufacturing PMI levels are indicative of improved competitiveness following Sterling’s depreciation and a healthy pickup in EA demand. The fall-back in inflationary pressures, the squeeze in real incomes and also the potential weakness in credit growth could put pressure on the consumer sector. Similarly, gains in competitiveness could reduce over time which would see all sectors returning to cautiousness over 2017 as negotiations between the UK and the EU begin.
US Manufacturing Falls Back in April
The headline US ISM Manufacturing reading fell back in April to 54.8 which was below expectations. However, despite the decline, the report reflected strength across major subcomponents. Production (58.6) and new orders (57.5) remain in expansionary territory and signal further gains in industrial production over the next few months. New export orders (59.5) also rose further, signaling more momentum from external demand and improved export prospects for manufacturing firms.
