GB: CIPS/PMI Manufacturing Index

Tue May 01 03:30:00 CDT 2018

Consensus Actual Previous Revised
Level 54.8 53.9 55.1 54.9

UK manufacturing made a relatively sluggish and softer than expected start to the current quarter. The sector PMI fell to 53.9 from a slightly weaker revised 54.9 in March to signal its worst performance in seventeen months.

The headline decline reflected slower growth of output, new orders and employment while business optimism about the year ahead dipped to a 5-month trough. Headcount posted its smallest increase in fourteen months and within this, consumer goods industries introduced their first cuts since February 2017.

Input cost inflation remained elevated but dropped to a 9-month low which, in turn, paved the way for a third successive decline in factory gate inflation. Output prices are now rising at their slowest rate since last August.

Today's results are in keeping with the recent picture of a sector that is still expanding but at a gradually decelerating rate. Taken together with the less aggressive inflation update, April's PMI survey should strengthen the case for no hike in interest rates at next week's BoE MPC meeting.

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.