GB: CIPS/PMI Manufacturing Index


Tue Sep 01 03:30:00 CDT 2015

Consensus Actual Previous
Level 52.1 51.5 51.9

Highlights
UK manufacturing underperformed in August. At 51.5, the headline PMI was down 0.4 points versus its unrevised July level and well below the 54.2 average for the current near-two-and-a-half year period of expansion.

Production registered a modest increase in response to rising new business which saw its strongest growth in five months. Once again the driving force was the domestic market as new export business declined for a fifth consecutive month. The high level of sterling continues to be a significant problem for exporters. Employment was essentially unchanged following twenty-five successive months of net job creation with cuts in larger-sized manufacturers roughly offset by increases amongst smaller and medium-sized companies.

Input costs fell substantially and at one of the steepest rates in the last sixteen years as tumbling oil prices were compounded by the buoyancy of the pound. Factory gate prices rose once more but the rate of inflation was little changed and by far the majority of companies reported no change in charges over the period.

Manufacturing activity looks to be moving sideways as output growth hovers only just above the zero mark. Accordingly, the sector looks unlikely to make much of a contribution to GDP growth in the current quarter. Rising new orders provide some reassurance about the outlook but sterling's ongoing overvaluation is becoming an increasingly negative factor and a slowdown in domestic demand now would be very problematic. In itself, there is nothing here to make the BoE MPC consider pulling forwards the timing of the first interest rate hike of the upcoming new cycle.

Definition
The Markit PMI manufacturing data give a detailed look at the manufacturing sector, how busy it is and where things are headed. Since the manufacturing sector is a major source of cyclical variability in the economy, this report has a big influence on the markets. And its sub-indexes provide a picture of orders, output, employment and prices.

Description
Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the ISM manufacturing index in the U.S. and the Markit PMIs elsewhere, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.

The Markit PMI manufacturing data give a detailed look at the manufacturing sector, how busy it is and where things are headed. Since the manufacturing sector is a major source of cyclical variability in the economy, this report has a big influence on the markets. And its sub-indexes provide a picture of orders, output, employment and prices.