UK Manufacturing PMI Surges After Three Successive Falls

2017-05-02 08:59:00 Martin Essex, MSTA

Talking Points

- The UK manufacturing PMI jumped to 57.3 in April, well above both the previous 54.2 and analysts’ consensus forecast of a fall to 54.0.

- In response, there a sharp rise in GBP/USD and a fall in EUR/GBP, though both moves were quickly reversed.

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The purchasing managers’ index for the UK manufacturing sector shot up to 57.3 in April, a three-year high and well ahead of both March’s 54.2 reading and expectations of a drop to 54.0. That ended a run of three successive falls in the PMI, which hit a four-month low the month before.

The PMI release followed news last week of disappointing economic growth in the UK in the first quarter of the year and suggests that the second quarter could be stronger after a rather subdued pace of activity. It also suggests that previous PMI numbers have underestimated the solidity of UK manufacturing activity, which remains robust despite the continuing uncertainties over Brexit. April was the ninth month in a row that the index has signaled expansion.

“The start of the second quarter saw a solid improvement in the performance of the UK manufacturing sector. Rates of expansion in output, total new orders and new export work all gathered pace, underpinned by robust business confidence and driving further job creation,” commented IHS Market, which compiles the report.

In response to the data, EUR/GBP dropped sharply but quickly recovered the lost ground. Similarly, GBP/USD jumped but then fell back before starting to rise again.

Chart: GBP/USD One-Minute Timeframe (European Trading Hours May 2)