PMI, UK and Euro-zone, January 2016: The manufacturing Purchasing Managers Index (PMI) for the UK showed an improvement in the growth rate with the index at 52.9 (compared to 52.1 for December). Overall, there was an improvement in domestic orders which supported a further increase in manufacturing production - the rate of expansion in output was at its fastest level for 19 months. Although Markit don’t publish separate figures for the sub-sectors of manufacturing, the chart in their news release does point to a strong increase in the PMI for investment goods which was at its highest level since the early part of 2014.
In the euro-zone, the PMI reading was 52.3, lower than the 53.2 recorded in December, but this is still a healthy positive figure and around the level that we have seen over most of the past year. Across the region as a whole, the pace of growth in both orders (both domestic and export) and output slowed, but there was an acceleration in the expansion of employment in the sector and an increase in order backlogs. Although comparisons between countries are not strictly meaningful, the strongest PMI reading in January was for Spain which was at an 8-month high of 55.4, but the reading of exactly 50 for France was a 5-month low for them.
In Asia there was a mixture of trends, with a lower PMI reading in Taiwan and Korea (with the latter moving from above 50 to below that level), while India saw an improvement that took the reading from 49.1 in December to 51.1; Japan and China saw only a marginal change in their index with the former at 52.3, while for China the PMI was 48.4.
In Europe, the index for Russia improved, but was still a fraction below 50, while both Turkey and Poland saw their PMI readings fall to 50.9; in contrast, the PMI reading for the Czech Republic picked up again in January to stand at 56.9, its highest level since July 2015 and the highest among the countries we monitor. The Markit PMI reading for the USA improved to 52.4 and while both Canada (49.3) and Brazil (47.4) also saw an improvement, their readings remain in negative territory; with a reading of 52.2, Mexico was only a smidgeon lower than in December.
All of the Markit PMI reports for major economies around the world are available from their web-site at http://www.markiteconomics.com/Survey/Page.mvc/PressReleases.
EC Economic Sentiment Indicator (ESI), January 2016: The European Commission (EC) compiles its ESI from a range of business surveys across the European Union (EU), including the CBI Industrial Trends Survey which we reported on last week. The latest reading shows quite a sharp drop for both the Euro-zone and the EU as a whole; in the Euro-zone, there was a marked decrease in industrial confidence due to respondents having more pessimistic views on all 3 elements of the indicator (production expectations, current level of orders books and stocks of finished products). For the EU as a whole, the fall in the overall ESI was mainly due to a deterioration in confidence in the service sector.
This is one of the quarterly surveys which has some extra questions; for us, the main one to report on is capacity utilisation which increased to 81.9% for the Euro-zone (from 81.5% in October) and 81.5% for the EU28 as a whole (from 81.2%). Although the overall trend is in the right direction, the UK’s capacity utilisation rate fell to 79.7% (from 80.4% three months ago) which is below its long-run average (since 1990) and the lowest since the middle of 2013.
You can download the European Commission’s report from their web-site at http://ec.europa.eu/economy_finance/db_indicators/surveys/index_en.htm (scroll down and open the drop-down menu for 2016) or request it from MTA.
BEAMA Contract Price Adjustment Service: Do you have long-term contracts, either with customers or suppliers? Have you thought about incorporating something in the contract that allows you to adjust the price according to changes in input costs?
On behalf of members, MTA subscribe to a service provided by our colleagues at BEAMA which gives a monthly track of key indices on labour and materials costs. Of course, you need to get the principle and the relevant formulas included in the contract, but this gives you a way of updating the relevant prices independently.
If you would like more details on this, please contact Geoff Noon (firstname.lastname@example.org) at MTA; we can send you a copy of the latest report and some typical formulae and can have a discussion about whether or not this would be useful for you.