Analyst at ING, James Knightly, explained that yesterday’s surprise jump in the
manufacturing PMI is at odds with other survey evidence suggesting sterling
strength and weak external demand is holding back the sector.
Key
Quotes:
"Yesterday’s release of the manufacturing purchasing
managers’ index for October showed the headline index rising to 55.5 from an
upwardly revised 51.8 figure in September. This is well ahead of the 51.3
consensus estimate and is very impressive given the strength of sterling and
external growth worries – note last week’s CBI industrial trends report
suggested the sector was really struggling with business optimism plunging. It
also appears somewhat odd given the relative weakness in the US, Chinese and
Eurozone PMI releases yesterday – how come the UK bucked the
trend?"
"Although question marks have to be raised over the outcome of
this survey, for now we have to take it at face value – the PMI reading is the
strongest for 16 months and was fuelled by a jump in new orders to 56.9. This
bodes well for output and employment in the sector and suggests that 4Q GDP
growth should improve on the rather disappointing 0.5% QoQ figure for 3Q15. It
also backs up recent positive comments from Bank of England officials and
suggests at the very least one further MPC member (most likely Martin Weale)
will join Ian McCafferty in voting for an interest rate rise on Thursday."
