Manufacturing PMI bounced back in June (48.6)

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Today’s Markit/CIPS survey indicates that activity in manufacturing contracted in June but less markedly than in May. Indeed the headline manufacturing PMI bounced back from 45.9 to 48.6. Manufacturing output probably contracted in Q2 and was a drag on GDP over the quarter.

Today’s Markit/CIPS survey indicates that manufacturing output contracted in June but less markedly than in May. The headline manufacturing PMI bounced back from 45.9 in May to 48.6, though remaining below the 50-threshold for the second month in a row. The output index bounced back markedly from 47.6 in May to 51.7, thus moving back above the 50-threshold and recording its sharpest gain since October 2009. Over all manufacturing output probably contracted in Q2 and was a drag on GDP over the quarter.

The new orders index, one of the leading indicators of the survey, was up by around 5 points, after registering its sharpest fall in more than twelve years in May. Nonetheless it remained below the 50-threshold for the third month in a row. This rebound was predominantly coming from domestic demand, with overall order books bouncing back at a faster rate than export orders. This is a piece of good news as June increase may signal that the U.K. domestic market is progressively recovering from its trough.

According to the CIPS panel, inflationary pressures were still on the upside in June, but less markedly than in May. In the coming months, manufacturing prices could decline in line with intense competition and weak domestic demand, signalling lower consumer prices. In addition the input prices index fell at its sharpest pace since May 2009. This could be a forceful argument for more QE on Thursday.

Finally, the employment index decreased further below the 50- mark to its lowest reading since November 2011.

Published On Mon, Jul 2 2012, 10:08 GMT Previous entries

Caroline Newhouse

Follow Follow my activity on FXstreet.com BNP Paribas website

Expert in United Kingdom and Nordic Countries.

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