The Pound suffered some loses yesterday after Manufacturing data was worse than expected in the month of June. The release showed a sharp decline to 54.3 in June versus 56.7 in May.
Fresh data released this morning from the Construction Sector has also shown a decline for the month of June with a reading of 54.8, down from 56 registered in May. Following the release, the Pound has experienced a further sell off, wiping out momentum gained last week.
A rate hike too early would be ‘bigger mistake’ than one slightly late, says Bank of England’s Vlieghe
Mr Vlieghe, in an interview on Monday said the UK economy still required stimulus given Brexit-related uncertainty and slowing consumer growth.
“I think the consumption slowdown is here, it’s not over. I don’t think there’s going to be a sufficient offset from investment and net exports to compensate for that”.
Data released last month showed households spent an extra 4.2% in May 2017 compared with May 2016 but only received an additional 0.9% of goods as inflation continued to bite. Sales in May were up just 0.9% on the year which marked the joint-weakest increase since April 2013.
“The risk that is still bigger is that putting rates up a little too soon in an environment where the economy is already slowing and it’ll slow further.“
In the U.S, manufacturing data releases from Markit and the ISM showed contradicting situations in the sector yesterday.
The Markit report showed that the sector’s index fell to 52 from 52.7 in May signalling the slowest rise in production volumes since September 2016 and weaker than analysts’ expectations for an unchanged reading. Yet the ISM index showed solid GROWTH with a reading of 57.8 in June from 54.9 in May. The best ISM reading since Aug 2014.
Chris Williamson, chief business economist at Markit, said: “Manufacturers reported a disappointing end to the second quarter, with few signs of growth picking up any time soon”.
“The PMI has been sliding lower since the peak seen in January and the June reading points to a stagnation – at best – in the official manufacturing output data. The survey’s employment index meanwhile suggests that factories will make little or no contribution to non-farm payroll growth in June.”.
The Non-Farm Payroll report is due for release on Friday.
Many will recall President Trump’s promise of increased spending on manufacturing infrastructure during his campaigning, however the gradual decline in spending since January shows he’s struggling to live up to those pledges.
The Eurozone Manufacturing sector reportedly had its busiest month in more than six years during June, with growth even spreading to Greece. The pickup in manufacturing is consistent with other indicators that economic growth in the Eurozone accelerated in the second quarter after reported growth in the first.
The Manufacturing data released by Markit showed a rise to 57.4 from 57 in May, reaching a 74-month high. That was slightly higher than the estimate of 57.3. The pickup in manufacturing was mainly led by Germany, Austria and the Netherlands.
A separate release from the European Union’s statistics agency showed the jobless rate flat lined at 9.3% in May with only 5,000 people finding jobs during the reported month.
US Bank holiday – US Independence day
9.30 am – UK construction PMI (June): forecast to fall to 55 from 56 in May. Actual 54.8.
9.00 am – Eurozone services PMI (June): no change expected at 54.7.
9.30 am – UK services PMI (June): expected to fall to 53.5 from 53.8.
10.00 am – Eurozone retail sales (May): expected to rise by 0.3% MoM and 2.6% YoY.
7.00 pm – FOMC minutes: Further details expected about the June rate increase.
1.15 pm – US ADP employment report (June): Expected to see 187K jobs created in June after 253K a month earlier.
3.00 pm – ISM non-manufacturing PMI (June): forecast to edge down to 56.5 from 56.9.
1.30 pm – US employment data (June): non-farm payrolls expected to see 180K jobs created from 138K a month earlier. Average hourly earnings expected to rise 0.3% from 0.2%. Unemployment rate expected to remain at 4.3%.