GB: CIPS/PMI Manufacturing Index

Fri Dec 01 03:30:00 CST 2017

Consensus Actual Previous Revised
Level 56.5 58.2 56.3 56.6

UK manufacturing had a surprisingly good November. The sector PMI was 58.2, up from a stronger revised 56.6 in October and comfortably above market expectations. It was also the best outturn since August 2013.

Output saw its fastest growth since September 2016 and one of its largest advances in the last four years. Importantly, the buoyancy here reflected strength in both domestic and overseas demand and the upturn was also broad-based. Employment expanded by more than in any month since June 2014 but backlogs still increased for the first time in half a year. Business confidence remained positive.

Meanwhile, inflation pressures intensified. Input costs rose at a pace only just short of October's 7-month peak, driven up by a combination of more expensive commodities, exchange rate weakness and supply-side constraints. In turn, factory gate inflation hits its highest mark in seven months and also saw one of its strongest readings in more than six years.

The November PMI results are in keeping with the bullish picture of manufacturing painted by the latest CBI Trends Survey. Both suggest that not only did November see a healthy rate of activity but that the near-term outlook is equally as bright. The BoE MPC will see this as further justification for November's interest rate hike.

The Manufacturing Purchasing Managers' Index (PMI) provides an estimate of manufacturing business activity for the preceding month by using information obtained from a representative sector survey incorporating around 3,000 companies. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting). The survey covers more than 600 industrial companies and is compiled by the Chartered Institute of Purchasing and Supply (CIPS) and Markit.

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.