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4 Jan 2016
UK manufacturing unexpectedly slows - ING
FXStreet (Delhi) – James Smith, Research Analyst at ING, notes that the UK manufacturing PMI fell unexpectedly to 51.9 in December, from 52.7 previously (consensus 52.8), consistent with levels seen through most of 2015 before the surprise uplift in October.
Key Quotes
“This marks a disappointing end for what was a difficult year for the manufacturing sector given external growth concerns and sterling strength. Looking at the details, Markit said that input prices continued to fall sharply in December, which they attribute to lower commodity prices (principally oil). Furthermore, export orders continued to grow, albeit at a slower pace.”
“All in all, this suggests that the manufacturing sector contributed very little to fourth quarter GDP growth (released at the end of this month), although it is worth noting that manufacturing only forms around 10% of the UK economy (vs. 30% in the late 1970s). The service sector, which makes up over three quarters, is performing better and we should get a further indication of this on Wednesday when the services PMI is released.”
“Overall, the economy remains strong and the case for a rate hike in 2016 looks very compelling. Although we continue to forecast a hike in the second quarter, the risks surrounding the EU referendum are beginning to build and the probability that the Bank of England will leave rates lower for a longer period of time is increasing.”
Key Quotes
“This marks a disappointing end for what was a difficult year for the manufacturing sector given external growth concerns and sterling strength. Looking at the details, Markit said that input prices continued to fall sharply in December, which they attribute to lower commodity prices (principally oil). Furthermore, export orders continued to grow, albeit at a slower pace.”
“All in all, this suggests that the manufacturing sector contributed very little to fourth quarter GDP growth (released at the end of this month), although it is worth noting that manufacturing only forms around 10% of the UK economy (vs. 30% in the late 1970s). The service sector, which makes up over three quarters, is performing better and we should get a further indication of this on Wednesday when the services PMI is released.”
“Overall, the economy remains strong and the case for a rate hike in 2016 looks very compelling. Although we continue to forecast a hike in the second quarter, the risks surrounding the EU referendum are beginning to build and the probability that the Bank of England will leave rates lower for a longer period of time is increasing.”