Posts Tagged ‘pmis’

When the Office of National Statistics (ONS) revealed data to show the UK economy was contracting again at the end of last year, a lot of people were surprised.

So cast your mind back to January 2012, or 25 January to be precise. The UK’s official statistical authority released data showing that the UK contracted by 0.2 per cent in Q4 2011. At the time, many economists said they didn’t believe the data.

When the ONS updated its figures, many thought they would be revised upwards, but instead the data got worse – so much so that now the ONS has the UK contracting by 0.4 per cent in Q4 of last year.

But the puzzle related to the Purchasing Managers’ Indices (PMIs). The PMI for manufacturing stood at 49.6 in December 2011, the PMI for construction stood at 53.2 and for services at 54. Markit, which was the co-complier of the PMI data, said that the figures were consistent with zero growth in the quarter. At the time many economists said that they thought the PMIs gave a more accurate picture.

Three months later, the story was even more puzzling. According to the ONS, Q1 2012 saw 0.3 per cent contraction. In March 2012 the manufacturing PMI stood at 52.1, the index covering construction stood at 56.7 and the index for services stood at 55.3. Markit said the data was consistent with growth of 0.5 per cent.

Even more economists said they thought the PMIs gave a more accurate story.

And yet the ONS data just carried on being bad. In fact, it finally recorded three quarters of contraction: Q4 2011, and Q1 and Q2 this year. It was a puzzle, all right.

Now forward wind the clock to today. The ONS recorded a 1.0 per cent growth rate in the quarter just gone. Yippee, thank goodness for that news.

Except the PMI for manufacturing in October was 50.6; for construction it was 50.9 and for services 47.5.

The fact is that when the UK economy was supposedly in recession Markit data suggested growth.

Right now it is consistent with contraction.

 

©2012 Investment and Business News.

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It was told here a couple of weeks ago how there were signs of green shoots. For example, industrial production in July saw its biggest month on month rise in 25 years. No less than 236,000 more people gained employment in the three months to the end of July.

That’s all very encouraging, but…

Last week saw the latest Purchasing Managers’ Indices (PMIs) from Markit/CIPS, and to put it mildly they weren’t very good.

In a nut shell, the PMI covering UK manufacturing fell from a score of 48.7 in August, which was poor, to 47.6 in September.  Bear in mind, any score under 50 is meant to denote contraction. The PMI for construction improved, but only mildly and from a low level. It rose from 49 to 49.5. As for services, the Business Activity Index fell from 53.7 to 52.2. Put them all together, allow for the importance of each of the three sectors to the UK economy and you get a composite reading of 51.1 from 52.2 in August. Markit reckons these indices suggest quarterly growth of 0.1 per cent.

Okay, that’s not much growth, but at least it is growth. Does that not mean the three reports combined suggest the UK is slowly pulling out of recession? Well maybe. But just bear in mind, that earlier this year when official stats proclaimed that the UK was in recession, cynics pointed to other data which painted a slightly more positive image of the economy.

Put it this way, when the Office of National Statistics said the UK was in recession, the PMIs suggested mild growth. Now the PMIs have deteriorated.

Sorry to leave this on such a downbeat note, but the PMIs indices covering employment painted an even worse picture. The PMI employment index fell to 48.1 – that’s a ten month low and consistent with unemployment rising.

©2012 Investment and Business News.

Investment and Business News is a succinct, sometimes amusing often thought provoking and always informative email newsletter. Our readers say they look forward to receiving it, and so will you. Sign-up here