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ECONOMIC DATA THIS WEEK

Flash Purchasing Managers’ Index, March 2020:  For the past few months, IHS Markit (compilers of the PMI data) have been publishing a flash indicator for the UK, Euro-zone and the USA.  We have held off on reporting these while they settled down and we could assess the relevance to the final numbers which are published on the first working day of the following month.  However, at a time when up-to-date information is vital, now seems like a good time to start noting these trends.

For the UK, the PMI for the service sector fell to 35.7 (a survey record low) while the PMI for manufacturing read 48.0 - only the lowest since December 2019.  However, this hides a problem with the way in which the PMI data is compiled, especially for manufacturing;  it is a composite index made up of trends for output, orders, employment, stocks of purchases and suppliers delivery times (the latter two are inverted).  The problem is that an increase in delivery times is treated as a positive indicator of increased demand but the currently extended times is caused by a lack of supply rather than an excess of demand,  This is serving to hold up the overall manufacturing PMI reading.

The output element of the overall UK manufacturing PMI fell to 44.3 which is a 92 month low (back to July 2012) and new orders stood at 44.9.  It is likely that the final index next week will show a sharper fall for the UK manufacturing PMI as it will reflect those returns which have been received in the past few days and our experience from our own survey is that the situation is still weakening.

The manufacturing PMI for the Euro-zone has also fallen but the reading of 44.8, which is the lowest since July 2012, is also affected by the calculation issues.  The manufacturing PMI for output only was 39.5, significantly lower than in the UK.  This represents a contraction from 48.7 in February and this is the steepest month-on-month fall in the output PMI since April 2009 - again, there is a good chance that the final figure next week will be even weaker.

We see a similar effect in the USA;  the overall manufacturing PMI fell to 49.2, its lowest level for 127 months;  however, the output PMI was only down to 47.6 and while this is also a 127-month low, it is noticeably better than the Euro-zone and also above the UK level.  The PMI is a change indictor rather than a measure of levels but it does appear that, so far at least, the US has seen a slightly less of an impact than Europe, but this is probably just down to timing.

The IHS Markit flash PMI reports can be requested from MTA or are available from their web-site at http://www.markiteconomics.com/Survey/Page.mvc/PressReleases.  Our usual full report for 25 countries and 2 regions will be in next week’s Friday Brief.