Details of the July 2016 UK Markit CIPS manufacturing PMI data report 1 August 2016
Flash 49.1. Prior 52.1
New orders 48.3 vs 56.3 prior
- Output 47.8 vs 53.6 prior
Crunch!
Headline and new orders at the lowest since Feb 2013
New orders post biggest drop in 18 years
Output lowest since Oct 2012
Input prices jump to highest in 5 years
Not much good news to grasp in this report. Apart from all the bad news, the stand out is the jump in input prices. This could be very important. We know that the falling pound has made imports more expensive so any inflation that comes from that is imported too. However, if core or domestic prices start rising, that's going to put some pressure on the BOE and whether they cut rates or not.
The case with the UK is that the BOE can do very little about high or low inflation when it's imported (see oil prices for one), and it takes quite some time for imported inflation to feed through to the economy, way longer than the BOE have had time to see since the vote. It's another reason why a rate cut may not be the done deal some think.
Reading the Markit report in full, despite the bad news, export orders grew. Whether they can totally take up the slack from the fall in new orders remains to be seen.
Markit's Rob Dobson confirms;
"The downturn was felt across industry, with output scaled back across firms of all sizes and across the consumer, intermediate and investment goods sectors, although exporters did report a boost from the weaker pound. However, the improvement in exports was less marked than previously estimated, blamed in part on sluggish overseas demand. The downside of the currency was an upsurge in input price inflation to a five-year high on the back of rising import costs."
UK manufacturing PMI
