UK manufacturing PMI shows strong growth since the Brexit referendum - ING

James Knightley, Senior Economist at ING, notes that the UK’s manufacturing PMI has jumped for the second month in a row and it now stands at its highest level since June 2014, which casts serious doubt on the prospect of additional Bank of England policy easing at the November MPC meeting.

Key Quotes

“The headline index had dropped from 52.2 to 48.3 in the immediate aftermath of the Brexit referendum on June 23rd, but it bounced back nicely to 53.4 in August and surprisingly, has moved even higher to 55.4 in August (consensus 52.1). It is clear that the 13% post referendum drop in the value of the pound has boosted international competitiveness, which in turn has seen a major improvement in export orders. It is also adding to inflation pressures with input and output prices both accelerating.

We will see later this week if the (much larger) service sector is rebounding to the same extent. If not (consensus is a drop to 52.2 from 52.9) then there remains a case for further BoE stimulus later this year. However, if the service PMI does indeed improve then it is looking as though the BoE will hold off until the new year and it will be up to Chancellor Philip Hammond to provide some medium to longer term fiscal support in November – note he is speaking at the Conservative Party Conference at 14:30 UK time today.”