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ECONOMIC DATA THIS WEEK

PMI, UK and Euro-zone, May 2019:  The UK Purchasing Managers Index (PMI) for the manufacturing sector fell again in August with the reading of 47.4 being its lowest level for 85 months.  In their News Release, IHS Markit, who compile the PMI’s, note that the high levels of uncertainty that are hanging over the UK and global markets have weighed heavily on this result, with new orders contracting at their fastest pace in over 7 years and business confidence at its lowest since this question was added to the survey in July 2012.  Output volumes  were also down and manufacturing employment fell at one of the fastest rates over the past 6½ years.

There is not much better news in the Euro-zone;  although the PMI reading ticked up from the July reading, it remains weak at 47.0, with Germany (which also saw a slight improvement) remaining the weakest PMI in the area by a large margin.  There is some good news in that seven of the eight countries covered had a higher PMI reading in August (the exception was Ireland where it edged down slightly) and of these, France moved back above 50;  however, this position is only shared with Netherlands and Greece, with the other 5 countries in negative territory.

The other 4 EU countries that we track - Czech Republic, Poland, Hungary and Sweden - also saw an improved PMI in August, but the first two of these remain below 50;  this position is shared with Switzerland and Turkey, with Russia relatively unusual in having a weaker reading than in July (but not unusual in being below 50).

The picture in Asia is more mixed;  Japan and Taiwan saw their already negative position fractionally lower, with a slightly larger fall for the ASEAN region (which is also below 50).  There was a significant improvement in the PMI for Korea, but not enough to move back to positive territory although the smaller rise in China did tip the reading above 50.  India, which seems to have been immune to the current negative trends had the largest fall in its PMI reading between July and August but remains above 50.

Each of the 4 countries in the Americas region had a different trend.  Mexico, which was already below 50, weakened further and it was joined in negative territory by Canada which shared the “largest fall” record with India.  The USA was virtually unchanged and remains just above 50 while Brazil, which had the strongest improvement between July and August, moved back into positive territory.

The IHS Markit PMI reports for major economies around the world are available from their web-site at http://www.markiteconomics.com/Survey/Page.mvc/PressReleases;  we have compiled a set of summary charts which is available to download below.

UK GDP data by region and country, 4th Quarter 2018:  The Office for National Statistics (ONS) has published data that breaks down the GDP data across the nine English regions and the three countries of the UK.  This shows that only the North-West region saw GDP contract in the final period of 2018, but this probably reflects a correction from the strong growth recorded there in the previous quarter.  In terms of consistent growth in the 2nd half of 2018, the South-east was the strongest region.

Perhaps the most interesting data for us is the breakdown of GDP growth by the sector of the economy because it gives a regional trend for production (most of which is manufacturing), construction and services.  Having said that, there is not that much difference in the regional data for the production sector and the most interesting trends are the divergences in construction activity;  this has been strongest in Wales and the East Midlands, while the East, London and South West regions declined in all four quarters of 2018.

If you are interested in more information, you can access the ONS report and data from their web-site at https://www.ons.gov.uk/releasecalendar (05 September) or request 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 (gnoon@mta.org.uk) 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.

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