PMI grows to 53.1 points in June

“The morning’s main focus is on June’s manufacturing data, the first of the week’s 3 PMIs set to give investors a fuller idea of how the United Kingdom economy performed across the second quarter”.

“Export orders remained disappointingly lacklustre despite the ongoing competitiveness boost of the weak sterling exchange rate”. The outlook for manufacturers looks somewhat mixed.

However, today’s survey suggested the supposed silver lining of a weak currency – more competitive exports – is proving elusive, even as the global economy picks up. China’s Caixin/Markit manufacturing PMI surprised positively as it rose from May’s print of 49.6 to 50.4 in June.

Manufacturing employment rose for the 11-month running in June.

Markit added the slowdown was broad-based, encompassing the consumer, intermediate and investment goods sectors.

According to IHS Markit who compiled the data activity in Britain’s factories fell sharply from 56.3 to 54.3 in June, a disappointing outcome for investors who had expected the sector to expand slightly to 56.5.

Britain’s manufacturing growth slowed to well below that of the wide European Union figure in June, in the latest sign that the United Kingdom economy is faltering.

Manufacturers seeking to cut costs and improve efficiency further reduced staff numbers in June, straining their operating capacity and leading to an increase in work backlogs, the survey showed. Overall, the survey dilutes the case for any near-term hike in interest rates.

An index reading of above 50 indicates manufacturing sector growth; a figure below that shows a contraction.

It put manufacturing activity at a reported three-month high.

Nevertheless, the headline figure averaged 51.7 during the April to June quarter, above the 51.2 seen in fourth quarter FY 2016. Fourteen manufacturing sub-sectors recorded increase in production level during the review month.

On the positive side – despite the disappointing June export orders – the overall substantial weakening of the pound and improved global demand should buoy United Kingdom manufacturers competing in foreign markets.