Manufacturing PMI falls, but export orders provide bright spot - EY ITEM Club comments

1 August 2016

  • Share
  • PMI falls to the lowest level since February 2013
  • Action by the MPC looks ever more certain

Martin Beck, senior economic advisor to the EY ITEM Club, comments:

“The flash manufacturing survey released in July had already indicated that manufacturers were suffering from the effects of the EU vote. The full-month survey disappointed further yielding a reading of 48.2. This was the lowest level since February 2013 and only the second time since early-2013 that the PMI had fallen below the 50-mark separating expansion from contraction.

“Meanwhile, there was little consolation from the detail of July’s survey. Output contracted across the consumer, intermediate and investment goods sectors. Employment in manufacturing declined for the seventh month in succession and input-price inflation rose to a five-year high off the back of sterling’s weakness and higher commodity prices. The one bright spot was a rise in export orders, no doubt helped by the decline in the pound.

“Today’s manufacturing PMI will be followed by the construction and services surveys later this week. The possibility that we could see some snap-back in August, aided by greater political certainty, shouldn’t be ruled out. But the weakness of the business surveys will further bolster the MPC in announcing a loosening of monetary policy when it concludes its forthcoming meeting on 4 August.”