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ECONOMIC DATA THIS WEEK

PMI, UK and Euro-zone, April 2017:  The Purchasing Managers Index (PMI) for the UK picked up strongly to a 3-year high level of 57.3 as both output and new orders expanded at faster rates.  Markit, who compile the surveys, note that this was under-pinned by robust confidence, although confidence is not directly part of the index (in this context it is worth noting that the data was gathered before the announcement of the General election).  Manufacturing production expanded at the fastest rate in 3 months with, encouragingly, the strongest sub-sector being for investment goods.  Although not directly relevant to our sector, the UK services PMI data was also positive, with a markedly better reading for business-to-business activity than for consumer services (and the PMI does not cover retail sales which is the main area of weakness at the moment).

The Euro-zone also saw an acceleration in the pace of expansion for the manufacturing sector with the index of 56.7 being the highest in 6 years.  Although the German PMI fell fractionally, it remains very high at 58.2 and there was a significant improvement for Austria (58.1, best for 73 months), Italy (56.2, also 73-month high) and France 55.1, 72-month high).  Like the UK, the Euro-zone saw stronger rates of growth in output, new orders and job creation.

The rest of the world saw all but one of the major countries with a PMI above the crucial 50 level, with the index for Brazil improving to 50.1 - its first positive reading since January 2015.  The exception was South Korea (49.4) which is reported to be suffering from low demand from China, influenced partly by geo-political issues linked to North Korea.

Overall, Greece was the only other country with a PMI below 50 and with the reading at 48.2, it is the weakest of the countries we monitor.  The strongest PMI reading is still in Sweden at 62.5, followed by Germany and Austria.

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.

European GDP, 1st quarter 2017:  Eurostat has issued a preliminary flash estimate that shows that the Euro-zone economy grew by +0.5% compared to the final period of 2016 and by +1.7% over a year earlier.  For the EU28, the growth rates were +0.4% and +1.9% respectively.

These growth rates all represent a minor reduction on the growth rates in the previous quarter, but not significantly so.  At this stage, we don’t have any further details by either sector or country.

You can download the Eurostat News Release from the web-site at www.http://ec.europa.eu/eurostat or request it from MTA.

European Commission Economic Sentiment Indicator, April 2017:  The European Commission (EC) draws on business surveys from across Europe, including the CBI for the UK, to arrive at its Economic Sentiment Indicator (ESI).  The latest data shows a significant increase for both the Euro-zone and the EU28 which reached their highest levels since August and September 2007 respectively.  This was driven by marked increases in confidence and was spread across the regions.

The rise in industry confidence in the Euro-zone resulted from more upbeat assessments about current order book levels and stocks of finished products, while production expectations were broadly unchanged (at a good level).  The ESI for the EU28 improved a little less than for the Euro-zone, mainly because the UK only saw a small improvement in its ESI, while the trend for Poland (the 2nd largest non-Euro economy) matched the pace among the Euro-zone countries.

This edition also gave us the latest figures on capacity utilisation which edged up again for both the Euro-zone and the EU28 and, in both cases, is at its highest since the 3rd quarter of 2008 which is when the recession really started to bite on data series such as this.  Capacity utilisation in the UK picked up from 81.2 in January to 83.0 in the latest survey - this is its highest reading since the 2nd quarter of 2015.

Finally, the EC report on their bi-annual investment survey;  this shows that real investment in the manufacturing industry is predicted to increase in 2017 by +5% in the Euro-zone, compared to a forecast of +3% in the survey carried out 6 months ago.  For the EU28, the forecast for 2017 is now for growth of +4%, also up from +3% in the previous survey.  Among the major economies, the most notable improvements in the outlook are for Italy and France, with Germany also a little better than in the Autumn 2016 survey, while investment expectations have eased a little in the UK and Spain.

You can download the European Commission’s report from their web-site at https://ec.europa.eu/info/business-economy-euro/indicators-statistics/economic-databases/business-and-consumer-surveys/latest-business-and-consumer-surveys_en or you can 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 (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.