OPINION
Market Rating Before FOMC MeetingJan 31
UK PMI Failed to Meet Expectations: Pound's Daily Loss Exceeded 1%
According to preliminary data released today by IHS Markit Economics, a London-based global information provider, manufacturing purchasing managers' index (PMI) in April was 55.3 and services purchasing managers' index (PMI) was 58.3 in the UK. During this period, the market expectation was that manufacturing PMI would be 59.0, whereas services PMI would be 60.0.
As Markit reported, the April data indicated that the pace of recovery in the UK economy is much lower, largely due to the slowest increase in new orders in 2022. Economic uncertainty and cost pressures arising from the war in Ukraine played an influential role in the responses of the survey participants.
The report noted that as the increased cost transitivity limited the increase in consumer spending after the end of coronavirus (Covid-19) restrictions, service sector activities experienced a significant loss of momentum, while the rise in factory output prices was at a record high. In addition, the loss of momentum in service performance was the largest since the sector-wide decline in relation to Omicron variant at the end of 2021.
Growth in manufacturing production, on the other hand, was reported to have slightly recovered after reaching a five-month low. Markit cited the efforts of goods manufacturers to fulfil accumulated orders and fewer supply chain delays as the main positive elements, while supply bottlenecks due to the war in Ukraine and Covid-19 closures in China continue.
According to the report, export sales fell for the second month in a row in private sector companies, reflecting the rising cost of household financing and price pressures on basic items, the decline in consumer demand and similarly concerns about business spending, high operating expenses and inflation. Here, foreign demand originating from Europe was also effective.
Private sector employment continued its positive trend in April, but the service sector employment creation rate fell to a 12-month low, however, businesses had difficulty finding staff, the report said.
The data released by Markit show that high commodity prices, especially for the energy group caused by the Russia –Ukraine war, are a strong obstacle to the expansion of British businesses. Depending on the strong labor market conditions, there is also an impact of a shortage in the labor supply and wages.
On the other hand, it is understood that the rate hikes of the Bank of England (BoE), which started in December 2021 and continued in February and March meetings, caused a decrease in domestic demand. As a matter of fact, the loss of pace in economic activity while inflation pressures continue may make it difficult for the BoE to be more aggressive on the path of interest rate hikes.
As Markit reported, the April data indicated that the pace of recovery in the UK economy is much lower, largely due to the slowest increase in new orders in 2022. Economic uncertainty and cost pressures arising from the war in Ukraine played an influential role in the responses of the survey participants.
The report noted that as the increased cost transitivity limited the increase in consumer spending after the end of coronavirus (Covid-19) restrictions, service sector activities experienced a significant loss of momentum, while the rise in factory output prices was at a record high. In addition, the loss of momentum in service performance was the largest since the sector-wide decline in relation to Omicron variant at the end of 2021.
Growth in manufacturing production, on the other hand, was reported to have slightly recovered after reaching a five-month low. Markit cited the efforts of goods manufacturers to fulfil accumulated orders and fewer supply chain delays as the main positive elements, while supply bottlenecks due to the war in Ukraine and Covid-19 closures in China continue.
According to the report, export sales fell for the second month in a row in private sector companies, reflecting the rising cost of household financing and price pressures on basic items, the decline in consumer demand and similarly concerns about business spending, high operating expenses and inflation. Here, foreign demand originating from Europe was also effective.
Private sector employment continued its positive trend in April, but the service sector employment creation rate fell to a 12-month low, however, businesses had difficulty finding staff, the report said.
The data released by Markit show that high commodity prices, especially for the energy group caused by the Russia –Ukraine war, are a strong obstacle to the expansion of British businesses. Depending on the strong labor market conditions, there is also an impact of a shortage in the labor supply and wages.
On the other hand, it is understood that the rate hikes of the Bank of England (BoE), which started in December 2021 and continued in February and March meetings, caused a decrease in domestic demand. As a matter of fact, the loss of pace in economic activity while inflation pressures continue may make it difficult for the BoE to be more aggressive on the path of interest rate hikes.
