All the day’s economic and financial news, including new manufacturing reports from around the world
- Latest: UK manufacturing growth slowed in June
- Pound drops after British data disappoints
- Eurozone factory growth hits six-year high
- German manufacturing growth at 74-month high
- Greek factories stop shrinking
Sterling continues to drop, as traders digest this morning’s PMI data.
The pound has now shed 0.7 of a cent against the US dollar, to $1.2955, wiping out Friday’s rally.
The UK’s manufacturing sector activity reading fell to 54.3 in June, marking its slowest pace of growth in three months.
This disappointing report has dealt another blow to sentiment and is likely to add to the horrible cocktail of soft economic releases which is slowly illustrating the impact of Brexit.
This chart shows how City economists had expected British factory activity to have been much stronger in June.
Many had expected a PMI in the 56-ish region, not as low as 54.3.
Big miss on the UK Manufacturing PMI. Nobody saw it that low. pic.twitter.com/0cUVPvk8dQ
Although UK manufacturing is obviously important, it only makes up around 10% of Britain’s economy.
On Wednesday, we find out how the dominant service sector fared in June. This morning’s disappointing factory data may be a sign that service companies also struggled, says Andy Bruce of Reuters:
UK manufacturing PMI drops 2 points in June.
Falls that big are followed up by a drop in the services PMI 66% of the time.
Howard Archer, Chief Economic Advisor to the EY ITEM Club, says the slowdown in UK factory expansion last month is “disappointing”, particularly as export growth slowed.
“The survey indicates that not only did output slow in June, but the sector is entering the third quarter with reduced momentum with new orders at an 11-month low. This was primarily due to weaker domestic demand, but it is disappointing to see that export orders slowed.
Furthermore, the slowdown in manufacturing activity is reported across all sectors – consumer, intermediate and investment goods. Backlogs of work fell in June which also points to weaker activity going forward. Additionally, confidence among manufacturers dipped to a seven-month low in June, although it was still decent, and employment growth slowed.
“The foot unexpectedly came off the accelerator last month suggesting that manufacturers’ attention was in part drawn to grappling with the uncertainty from both the general election and the start of Brexit negotiations.
Encouragingly, production levels are still in positive territory but growth slowed to its lowest rate for three months and most disappointingly, given the weakness in sterling, was the slowdown in new export business.
In another boost for Europe, the jobless rate across the eurozone remains at its lowest level since the financial crisis began.
Unemployment in the single currency region was 9.3% in May, matching April’s figure, and the lowest since March 2009.
City experts are disappointed to see that Britain’s manufacturing growth has dipped to a three-month low in June:
Duncan Brock, director of customer relationships at the Chartered Institute of Procurement & Supply, says political anxiety is hurting the sector:
“Manufacturing activity showed signs of slowing this month, as fears that the sector would feel the impact of both the election and the start of Brexit talks materialised.
“While the sector remained in growth, a softening of new orders suggested some hesitancy from the UK to commit to new projects, which will be a worry as the domestic market has been the main driver of growth in the past two months. Apart from some orders from the US and Western Europe, exports fared little better as a continuing weak, but stable pound began to lose some of its allure.
“The PMI figures show a drop in confidence this month as manufacturers grappled with the general election result and uncertainty arising from our negotiations to exit the EU.
“But manufacturers are resilient. They have a keen eye on margins and are taking steps to future-proof their business. Many are stockpiling and investing to win contracts, while others are boosting their export order books.
“The UK’s manufacturing sector is still growing but the pressures that have become almost de rigeur in UK economic data are still very much present.
New business growth has slowed which is limiting the increase in new employment in the sector, confidence has slipped to a 7 month low and while price pressures are easing, supply lines are becoming stretched and are therefore slowing, extending the time taken on projects.
While rest of the EU outperforms the UK economy it will make Brexit negotiations easier- EU can claim costs for UK. Reversal would be tricky https://t.co/OnPyXEd0Zd
It’s not all bad news for the UK. Factory growth over the last quarter is the strongest since 2014, despite the slowdown in June.
Sterling has fallen by half a cent, following the news that UK factory growth was weaker than expected last month.
The pound is now trading at $1.297, away from the six-week highs struck last week.
Breaking: Britain’s manufacturing growth slowed last month, as UK factories failed to keep pace with their rivals across the channel.
The UK manufacturing PMI has dropped to 54.3 in June, well below expectations of a reading of 56.5. This is the slowest growth in three months.
“New business rose at the weakest pace for nearly a year and growth was down sharply from April’s near three-year high. This slowdown was largely centred on the domestic market, where increased business uncertainty appears to have led to some delays in placing new contracts.
“Export orders remained disappointingly lacklustre despite the ongoing competitiveness boost of the weak sterling exchange rate.
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It’s official — the eurozone’s factory sector is growing at its fastest rate in over six years.
“Eurozone manufacturing growth gained further momentum in June, rounding off the best quarter for just over six years. At current levels, the PMI is indicative of factory output growing at an annual rate of some 5%, which in turn indicates the goods- producing sector will have made a strong positive contribution to second quarter economic growth.
“Exports continue to play a major role in driving the expansion, increasing in recent months at rates not seen for six years, buoyed in part by the weak euro. But it’s also clear that factories are benefitting from ongoing strong demand from domestic customers.
“There’s no sign of the impressive performance ending any time soon. Optimism about the year ahead has risen to the highest for at least five years, backlogs of orders are building up at the fastest rate for over seven years and factories are reporting near-record hiring as they struggle to deal with the upturn in demand. As such, the manufacturing sector is clearly in expansion mode and looks poised for continued robust growth in coming months.”
Newsflash: Eurozone manufacturing growth has hit a new six-year high.
More good news! Greece’s factory sector has returned to growth for the first time since last summer.
Do not adjust your sets: Greek manufacturing PMI is in *growth* again. First time in nearly a year. Overall eurozone at April 2011-high pic.twitter.com/aL7kZ7FcO1
Boom! German factory growth has hit a 74-month high.
Germany’s manufacturing PMI, which measures activity across the sector has risen to 59.6 in June, up from 59.5 in May.
“Although output growth held broadly steady and job creation eased slightly since May, the expansion in new orders accelerated further. Suppliers remained under intense pressure with input delivery times lengthening to the greatest extent since April 2011.
“Input price inflation slowed for the second month running to the weakest since November 2016, but remained stronger than the 21-year survey trend level. Output prices increased at the sharpest rate since February.”
France’s factories have posted another month of solid growth too, as demand and business confidence rose.
The French manufacturing PMI has jumped to 54.8 in June, from 53.8 in May – that shows a faster expansion, but not quite as pacy as expected.
*FRANCE JUNE MANUFACTURING PMI RISES TO 54.8; PRELIM. 55
“A strong degree of business optimism was also a key feature of the latest survey, perhaps buoyed by reduced political uncertainty following the conclusion to June’s legislative elections and robust economic conditions in the Eurozone.”
Just in…Italy’s factory sector picked up last month, thanks to a surge of new orders.
Italian Manufacturing PMI: 55.2 vs exp 55.3; prev 55.1
A strong end to the quarter with a pickup seen in output & exports pic.twitter.com/cNtX3AMqMj
European stock markets are rallying this morning, helped by the pickup in Chinese factory growth last month.
The main indices have all risen in early trading. London’s FTSE 100 has jumped by 42 points, or 0.6%, to 7355.
It’s manufacturing Monday, and with China’s Caixin PMI just about climbing out of contraction territory the European indices got off to a strong start.
Having neared 2 month lows last Friday there was plenty of room for the FTSE to bounce back this morning and bounce back it did, rising more than half a percent to sit just below 7350. The thrust of the UK index’s growth stemmed from the commodity sector, itself boosted by the latest 0.5% jump from Brent Crude, the black stuff now trading at $49 per barrel for the first time in around a month.
Breaking: Spain’s factory data has missed forecasts, but still shows solid expansion.
The Spanish manufacturing PMI has come in at 54.7, down from May’s 55.4.
“June saw a continuation of the recent strong performance of the Spanish manufacturing sector, with growth remaining elevated. The first half of the year has been impressive, with no real sign among the latest data that rates of expansion are running out of steam heading into the second half.
“One thing that is on the wane is inflation, with both input costs and output prices rising at the weakest rates since late-2016. This should help firms maintain competitive pricing, enabling them to take advantage of improving customer demand.”
Spanish manuf PMI headline index down but sill no sign of cooling. Output, new orders up; employment at near-record high.
The Russian PMI is a worry.
Growth in Russia’s manufacturing sector almost fizzled out last month, with its PMI dropping to an 11-month low of 50.3, from May’s 52.4.
Norway’s manufacturing base just posted its strongest growth in five years, according to its PMI report:
Other Asian countries have followed China’s lead, and reported manufacturing growth last month.
Reuters has the details:
Factory Purchasing Managers’ Indexes for South Korea, Japan,Taiwan Vietnam and India all remained above the 50-mark that separates contraction from expansion on a monthly basis.
And all of these indexes, except for Japan and India, rose from the previous month, indicating an acceleration in expansion.
Metal prices have jumped this morning, following the news that Chinese factories returned to growth last month. Aluminium and copper are both rallying.
China got PMI Day off to a decent start, by reporting its fastest factory growth in three months.
“The manufacturing sector recovered slightly in June, but based on the inventory trends and confidence around future output, the June reading was more like a temporary rebound, with an economic downtrend likely to be confirmed later.”
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
We’re getting a healthcheck on the world’s factories today, as data firms release their monthly Purchasing Managers Index reports.
Happy PMI day!
With more hawkish noises coming from certain quarters of the Bank of England’s Monetary Policy Committee in recent days, markets are likely to be especially sensitive to the PMI surveys this month.
As they were conducted mid-month in June, it should be expected that the results incorporate businesses’ views about the impact of the indecisive general election result on 8 June.
Looking ahead, highlights include Eurozone, UK and US mfg PMIs, US ISM and construction spending.