MNI 5 THINGS: UK PMIs Point To Underlying Weakness

--UK April Purchasing Managers Indices Weaker Than in Feb, Before Snow Impact

     LONDON (MNI) - Thursday saw the release of the UK April Services PMI,

completing the trio of monthly surveys curated by IHS Markit, closely watched by

markets.

     Below we outline five themes for particular attention.

     - April recap. 

     The UK PMI data showed modest growth in April from a weather-disrupted

March. All three sectors were past the respective 50-threshold, with

construction markedly up from 47.0 in March to 52.5 in April, services up

slightly to 52.8 from 51.7 in March and manufacturing down a point to 53.9 in

April.

     Table 1: UK PMIs

Month     Manufacturing PMI  Construction PMI  Services PMI

-----------------------------------------------------------

February               55.2              51.4          54.5

March                  54.9              47.0          51.7

April                  53.9              52.5          52.8

     - Underlying Weakness. 

     March PMIs showed weather-disruptions impacting growth, with construction

hit the hardest. Therefore, comparing April with February (before the snow

impact) makes more sense intuitively when trying to capture the underlying

growth momentum in each sector. Both the manufacturing and services PMIs failed

to rebound above their respective February level in April, while the

construction survey posted a marginal improvement. On balance, this appears to

support data released by the ONS last Friday which suggested a weakening in the

underlying strength of the UK economy.

     - Don't forget about the retail sector. 

     While the services PMI notched a modest gain in April, it's worth

remembering that the survey does not capture activity in the retail sector.

While only accounting for just above 5% of GDP, the retail sales were hit

particularly badly by the extreme weather (particularly supermarket pump sales)

and bounce back in sales volumes growth in the April data set should not be

ruled out. So, while the report may not have been super encouraging, there may

be some room for further growth.

     - Construction bounce back. 

     Construction output tanked 3.3% in Q1 and while a large bulk of this was

weather related, the ONS did point out around half of the decline took place in

January, before the arrival of the snow (but admittedly after a bumper

December). The April PMI broke past the neutral-50 mark to sit at 52.5 in April,

which should reflect an increase in output but historically, only an index value

above 53.0 has been consistent with an increase in official quarterly output.

The sector, for now, may still be stuck in the snow mud.

     - Food for thought at Threadneedle St. 

     It is unclear just how much weight Bank of England staff attach to the

PMIs. They were interested enough to induce emergency easing back in August 2016

after the flash 'Brexit' PMIs, action which some deemed unnecessary, but have

failed to track GDP growth convincingly well (the Q1 set of PMIs were consistent

with 0.3% growth on the quarter versus the realised 0.1% initial estimate). This

month's PMIs do suggest underlying growth may be starting to soften, aiding the

doves, but elements within reports also contained ammunition for the hawks too,

such as firms across all the sectors continuing to report upward wage pressures.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

[TOPICS: MTABLE,MABDS$,M$B$$$,M$E$$$]