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Adam Solomon is a specialist in business foreign exchange issues at foreign exchange brokers TORfx.

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Home Economic Fundamentals UK Economic Barclays expects uncertainty despite strong PMI data

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Barclays expects uncertainty despite strong PMI data PDF Print E-mail
UK Economic
Written by Will Peters   
Monday, 01 February 2010 14:53
Analysts suggest latest PMI data will seal the end of quantitative easing.
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Barclays (LON:BARC) has reacted to the best manufacturing PMI data in 15 years with guarded optimism.

Today it was revealed that Manufacturing PMI, based on a survey of manufacturers, jumped to 56.7 - the highest reading since 1994, from 54.6 in December.

"The 15 year high in reported activity is a shot in the arm for battle-hardened UK manufacturers, who have outperformed forecasts to show signs of a recovery gathering momentum," says Graeme Allinson, Head of Manufacturing, Transport and Logistics at Barclays.

“However, for this trend to be sustained a lot will depend on several fundamentals in 2010 that are at present unclear, including global growth, general business confidence and the impact of an election on regulation, tax and spending. Until a clearer picture emerges we can expect to see general economic uncertainty hampering growth.”

The PMI data is compiled and presented by the Chartered Institute of Purchasing and Supply and Markit Economics.

Adding to the PMI data is news that house prices climbed for a sixth month as a shortage of homes for sale supported property values, Hometrack Ltd said.

Along with data over the past week showing a pickup in consumer confidence, the numbers give the Bank of England’s Monetary Policy Committee room this week to pause emergency bond purchases after buying 200 billion pounds ($318 billion) so far. They also may indicate the economy is strengthening as an election approaches after barely growing in the fourth quarter.

“Most of the recent data points to quite a strong rebound and are supportive to pausing the process of quantitative easing,” Peter Dixon, an economist at Commerzbank AG (ETR:CBK) in London, told Bloomberg.

“Stronger-than-expected numbers add support to the view that now is not the time to further stimulate activity.”

Economists had predicted a figure of 53.9 for today’s CIPS manufacturing index, the median of 25 forecasts in a Bloomberg News survey showed. Readings above 50 indicate expansion.

New orders increased at the strongest pace in six years, helped by stronger domestic and export demand, Markit said. The pound has lost about a quarter of its value against a trade- weighted basket of currencies over the past three years, making British goods cheaper abroad.
Last Updated ( Monday, 01 February 2010 14:56 )