Manufacturing figures don’t bode well for Q2 GDP – fall in export orders is a 'worrying development', says ITEM Club

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Nida Ali, economic advisor to the EY ITEM Club, comments on today’s PMI manufacturing figures:

  • Despite continued expansion in manufacturing, today’s PMI figures clearly point to an underlying weakness in the sector
  • The decline in demand from non-EU countries is particularly worrying 
  • These figures don't bode well for GDP growth in Q2, which is already likely to be dragged down by the extra Bank holiday in June

“Although continued expansion in the manufacturing sector provides a small crumb of comfort, a number of factors in today’s PMI figures clearly point to underlying weakness.
 
“With little prospect of a pick-up in export demand from Europe, the fall in export orders from non-EU countries is a worrying development. Moreover, the increase in output was largely supported by a decline in the backlog of work, a trend which is unsustainable and suggests that growth in the sector will probably slow in the coming months.
 
“However, a recent CBI survey reported strong trends for manufacturing across the board, so the PMI results are quite surprising. These mixed signals make it very difficult to accurately judge the implications for overall growth. But, on the face of it, these figures don't bode well for GDP in Q2. The extra Bank holiday in June is already likely to be a drag on growth and weak output in the rest of the quarter would compound this further.”