UK DATA: PMI: Price increases, lower employment, 16-year low export manuf orders
A few things to note in the UK flash PMIs. First a notable miss for services at 48.9 versus 51.5 expected. That is a 27-month low according to the press release. Output prices increased at the fastest pace for "nearly two years" with input costs the highest since Feb23. This in itself isn't surprising for this month as the NIC and NLW increases both took effect in April (which increased the costs of employing some people by more than 10% in aggregate). On the employment side firms reported not replacing voluntary leavers - but there wasn't such a mention of redundancies in the press release. Service output declined "marginally" and manufacturing export new orders were the lowest since Feb09. Overall, little to be positive about in this release.
Highlights from the press release:
- "Average cost burdens increased at a sharp and accelerated pace in April. The overall rate of input cost inflation was the fastest since February 2023. Survey respondents mainly cited higher National Insurance contributions and a rise in the National Living Wage. Output charge inflation also picked up in April and was the highest for nearly two years. This was driven by a particularly steep acceleration in factory gate price inflation."
- "Decreased workloads and rising payroll costs contributed to employment cutbacks across the UK private sector in April. Staffing numbers have now decreased for seven months running, reflecting ongoing job shedding in both the manufacturing and service sectors. Survey respondents widely noted that squeezed margins had resulted in the non-replacement of voluntary leavers."
- "Service providers recorded a marginal decrease in business activity during April, which ended a 17-month period of expansion. Rising global economic uncertainty and subdued domestic demand conditions were cited as the main factors weighing on output."
- "Manufacturing export sales were particularly hard-hit by rising global trade tensions. Aside from the pandemic, the latest decline in new orders from abroad across the manufacturing sector was the steepest since February 2009."
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GILTS: Outperforming Bunds
Hard to pin down a driver for the early outperformance in gilts vs. Bunds, with UK yields 2.5-4.5bp lower on the day
- Plenty of risk events evident for UK markets this week, as detailed earlier, but little in the way of overt fresh catalysts to identify.
GERMAN DATA: March Flash PMI: Manufacturing Buoys Composite, But Services Weak
The German services PMI fell to its lowest since November at 50.2 (vs 52.0 cons, 51.1 prior), but this was slightly offset by the strongest manufacturing reading in 31 months (48.3 vs 47.0 cons, 46.5 prior). This helped the composite reading reach a 10-month high of 50.9 (vs 51.1 cons, 50.4 prior).
Despite this, the details of the PMI screen dovish – particularly for services, which accounts or ~70% of gross value added in Germany. Underlying services demand remains weak, while both input cost and output charge inflation cooled in March.
There was an uptick in confidence on hopes of a boost in infrastructure spending following the recent fiscal announcements.
Key notes from the release
- “The upturn in manufacturing was driven in large part by stronger demand in the sector, with goods producers reporting a first – albeit modest – rise in new orders since March 2022. Where an increase was recorded, some firms remarked on stronger domestic demand and clients trying to build up stocks”.
- “Services firms meanwhile recorded the steepest drop in new business in just over a year, citing a wait-and-see attitude among customers amid a backdrop of market uncertainty”.
- “March seeing a tenth successive monthly decline in employment. The rate at which workforces fell eased since February, however, reflecting a slowdown in the pace of manufacturing job shedding to the weakest in nine months. Services employment once again rose slightly”.
- “Turning to prices, March’s flash data showed a cooling of inflationary pressures across the eurozone’s largest economy. This reflected developments in the service sector, where firms reported the slowest increases in input costs and prices charged for five months”.
- “Growth expectations increased in both monitored sectors and remained stronger in manufacturing than in services. Reports from surveyed businesses highlighted positivity around a boost in infrastructure spending and hopes of a general upturn in economic conditions”.
MNI: GERMANY FLASH MARCH MANUF PMI 48.3 (FCST 47.0, FEB 46.5)
- MNI: GERMANY FLASH MARCH MANUF PMI 48.3 (FCST 47.0, FEB 46.5)
- MNI: GERMANY FLASH MARCH SVCS PMI 50.2 (FCST 52.0, FEB 51.1)
