UK: PMI figures spark hopes of “green shots” – UOB

Economist at UOB Group Lee Sue Ann assessed the recent PMI results in the UK.

Key Quotes

“The UK’s final Markit/CIPS composite purchasing managers’ index (PMI) was 53.0 in February, slightly less than a 16-month high of 53.3 in January, but much improved from the final quarter of 2019, when the reading stayed below 50 amid prolonged political uncertainty. The services PMI was finalized at 53.2, from a flash estimate of 53.3 and a 16-month high of 53.9 in January, which reflected a post-election bounce in business sentiment that risks being undermined by the coronavirus. The manufacturing PMI hit 51.7 in February, the fastest pace in ten months. This is up from 50.0 in January, but slightly lower than an earlier estimate of 51.9, however. Meanwhile, the construction PMI jumped to 52.6 in February, up from 48.4 in January, the fastest pace in over a year.”

“But with all responses to the survey received by 27 February, the results only hint at the possible impact of coronavirus, which could make the rebound short-lived.”

“For now, we are assuming the impact to be short-lived. However, should the COVID-19 outbreak become more protracted in the UK, the impact from domestic shocks, alongside spillovers from the global slowdown and supply chain disruptions, will see us downgrade our forecasts for UK GDP growth. In this scenario, we would also expect further rate cuts by the Bank of England (BOE).”