United Kingdom: Services PMI edges back into positive territory in April, manufacturing PMI dips as stockpiling eases
May 3, 2019
The IHS Markit/CIPS UK services Purchasing Managers’ Index (PMI) rose from a multi-year low of 48.9 in March to 50.4 in April. As a result, the indicator moved back above the 50-point threshold that separates expansion from contraction in the sector. It should be noted that the services PMI does not cover certain subsectors which have performed well in recent months, such as retail, education and health, meaning the PMI could be overstating the weakness in the sector. The Bank of England also cautioned recently that Brexit uncertainty could be affecting the predictive power of the PMI surveys.
Although firms reported a rise in business activity in April, new work and exports continued to decline, while employment was largely unchanged since March. Input inflation increased on the back of the recent hike in the minimum wage and higher fuel costs, although output inflation was mild. On the plus side, business sentiment improved, potentially linked to better Brexit prospects following the avoidance of a no-deal exit and the extension of the negotiating period till end-October.
The IHS Markit/CIPS manufacturing PMI fell from 55.1 in March to 53.1 in April. However, the index remained above the 50-point threshold that separates expansion from contraction in activity in the manufacturing sector, where it has been since August 2016.
April’s fall came amid more sluggish growth in output and new orders, lower exports and a slower pace of stockpiling following the Article 50 extension. Lower exports were attributed to Brexit fears and weaker global momentum. Both input and output price inflation eased, while business sentiment warmed.
Author: Oliver Reynolds, Economist