Rollercoaster

Recent data looking at manufacturing in the UK and euro area suggested that the UK’s comeback seen in April and May went into something of a reverse in June, while in the euro area, it just got better.

In the first quarter of this year, the UK was the slowest growing economy in the EU – after comparing with the previous quarter. Was this a one off, an unfortunate blip soon to be corrected, or something more worrying?

Until we get the official data, the purchasing managers indexes (PMIs) are about the best guide we have. Back in April and May, the PMIs for the UK suggested a reasonable improvement, although they still pointed to more robust growth in the euro area.

Now we have the PMIs covering manufacturing for June. Over the course of this week, we will get PMIs for construction and services, by which time we will have a more accurate picture. For the time being, we will just have to make-do with the data on manufacturing.

And here is the story. By the way, 50 is the key reading – Anything above suggests growth, below points to contraction.

PMIs UK euro area, source Markit for euro area, Markit/CIPS for the UK
UK54.3Thee month low
Euro area57.4Highest reading in over six years
Austria60.776-month high
Germany59.674-month high
Netherlands58.674-month high
Ireland5623-month high
Italy55.22-month high
France54.82-month high
Spain54.72-month low
Greece50.537-mnonth high

Or, to put it another way, only in Greece was the reading lower. But at least in Greece the index is picking up.

The UK also saw input and output cost inflation continue to rise but ease in the euro area.

Looking at the euro area, Chris Williamson, Chief Business Economist at IHS Markit, which compiled the data, said: " There’s no sign of the impressive performance ending any time soon. Optimism about the year ahead has risen to the highest for at least five years, backlogs of orders are building up at the fastest rate for over seven years and factories are reporting near-record hiring as they struggle to deal with the upturn in demand. As such, the manufacturing sector is clearly in expansion mode and looks poised for continued robust growth in coming months.”

As for the UK, Duncan Brock, Director of Customer Relationships at the Chartered Institute of Procurement & Supply, which works with Markit on the data in the UK said: "For now, optimism remains relatively high, job creation solid across corporates and SMEs and additional efforts are being made to improve efficiencies across the sector. Yet uncertainty remains the enemy, and the next few months will be a waiting game for manufacturers hoping for more stable conditions.”