UK: Manufacturing PMI disappoints - ING

James Smith, Economist at ING, suggests that heightened concerns about global growth continue to weigh on UK manufacturers, although uncertainty surrounding the EU referendum may be starting to play a role.

Key Quotes

“The UK Markit/CIPS Manufacturing PMI delivered a small improvement on February’s reading (51.0 vs 50.8), although it came in below the consensus expectation of 51.2. Following last month’s disappointing reading, it seems that financial market volatility and heightened concerns about global growth are continuing to weigh on business confidence, outweighing any boost from the weaker pound. The third consecutive decline in the new export business component adds some weight to this idea.

But it is also possible that uncertainty surrounding the outcome of the forthcoming EU referendum is filtering through to business confidence. In advance of the vote, we may see signs that businesses are temporarily delaying hiring/investment plans, until the result becomes clearer.

A poor services PMI reading next Tuesday would give further weight to this theory, and we think that there is scope for another sub-consensus reading. Given that the service sector makes up around 80% of the economy, any disappointment could suggest that momentum is slowing to some degree as we head into the second quarter.”