GB: CIPS/PMI Manufacturing Index

Tue Apr 03 03:30:00 CDT 2018

Consensus Actual Previous Revised
Level 54.7 55.1 55.2 55.0

UK manufacturing looks to have had a decent, and slightly better than expected, March according to the new PMI survey. At 55.1, the headline index was a tick firmer than its downwardly revised February reading but also in line with its first quarter average which was the weakest in a year.

Output was up for a twelfth successive month and at the fastest rate so far in 2018. However, new orders growth flatlined and, in line with the PMI itself, the quarterly mark here was the lowest in a year and so indicative of some underlying slowdown. Exports held up well, in part due to the exchange rate, but a slight fall backlogs accommodated a reduced increase in sector headcount. Even so, business sentiment remained positive despite Brexit worries.

Meantime, price pressures eased somewhat with both cost and factory gate inflation decelerating from their respective February levels.

The March PMI results provide further evidence of a general cooling in business activity rates in UK manufacturing. However, current levels remain comfortably in positive growth territory and today's results may have been biased weaker by bad weather. This latter development could also have been a factor in a sharp deterioration in vendor performance. In any event, today's report is unlikely to deter those BoE MPC members already leaning in the direction of another 25 basis point hike in Bank Rate next month.

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.