UK: PMI falls to 52.8 in January - ING

James Knightley, chief international economist at ING, notes that the UK purchasing managers index for the manufacturing sector has fallen more than expected to stand at 52.8 in January versus 54.2 in December and is below the 53.5 consensus forecast.

Key Quotes

“Both orders and output slowed, with the fact that there is still at least some positive growth almost certainly down to the biggest reading for inventory building in the survey’s 27-year history. Manufacturing is so reliant on complex supply chains that precautionary inventory building is a necessity.”

“After all, we are so close to Brexit day and an economically disruptive 'hard' Brexit remains firmly on the table. The fact that the overall reading wasn't stronger suggests that final demand for finished products is subdued.”

“With business optimism slipping to a 30-month low, a recession in the manufacturing sector therefore looks increasingly likely.”