Return to Insights

PMIs in Focus

Release of UK PMIs sees contractions in services and manufacturing, expanding US PMIs, and what's happening today.

UK PMIs In Focus

Yesterday’s UK PMI release saw services and manufacturing in contractionary territory having hit 49.2 and 45.2, respectively. This came against expectations of services hitting 49.5 and manufacturing hitting 45, with the composite figure missing expectations of 48.8, having come in at 48.6.

Yesterday’s PMI print indicated that output has reduced for the third consecutive month across the private sector, indicative of economic activity slowing with monetary conditions being at their tightest level since 2008. This involved the services sector output contracting at its highest level since January, while manufacturing output eased for the eighth consecutive month.

This eight-month period of contraction within the manufacturing sector, which represented the most protracted period of decline since 2008-09 in the wake of the Global Financial Crisis. Here, the S&P press release noted how “manufacturers noted that customer destocking and a lack of incoming new work to replace completed contracts had weighed on production schedules”.

Unlike the US private sector, which saw American firms’ 12-month economic outlook improve to its highest level in well over a year, economic optimism fell in the UK for the first time since July as growth expectations similarly diminished. According to the survey, firms “cited worries about the UK economic outlook and constraints on spending due to higher borrowing costs.” Such fall in optimism fed into the labour market cooling as many companies conducted that hiring freezes.

Some positive news however came in relation to inflation figures, with input price inflation easing for its third consecutive month to its lowest level since early 2021. While the data suggested that some business saw higher costs, the primary drivers behind this was citied as increased labour costs and fuel prices. Commenting on this, the Chief Business Economist at S&P Global Market Intelligence said that “In this context, any upward inflation pressures due to higher oil prices will be a major concern, meaning it would be unlikely for policymakers to rule out the possibility of rates rising again later in the year”.

Accordingly, all eyes now turn to the BoE interest rate decision on 2 November.

 

US PMI Beat Expectations

Yesterday showed US PMIs come in stronger-than-expected, with the services and manufacturing index both in expansionary territory, having risen to 50.9 and 50, respectively.

When looking at the composite figure, the print came in at 51, up from last month’s figure of 50.2%, indicating that the rate of expansion has increased at its highest rate since July, though August and September’s Prints were pretty well stagnant.

According to the data, released by S&P Global, demand conditions for manufacturers improved for the first time in around half a year. Nevertheless, new business continued to see some headwinds, with demand falling for the third consecutive month. Elsewhere, while there was some marginal job creation, uncertainty around future economic conditions was cited as a reason why some employers are being more conservative in hiring.

When looking at inflation, operating expenses rose at the slowest pace in three years, suggesting that inflationary pressures may be continuing to ease. Indeed, average selling price inflation similarly came in at its lowest level since June 2020. Here, S&P noted that “firms were reportedly keen to pass through any cost savings made to customers in a bid to drive sales”.

Today’s Events

Today will see the Bank of Canada make their latest interest rate decision at 1500. The benchmark interest rate was kept unchanged at their last monetary policy meeting on 6 September, and the general market consensus is indicating that rates will again be kept unchanged today. This comes as the Canadian economy continued to face many economic headwinds with a recent slowdown in growth particularly worrying policymakers. Q2 GDP for example unexpectedly fell 20bps, and thus policy makers will be particularly cognisant of monetary conditions implications on growth.

Later in the day, the ECB’s President Lagarde will speak at 1800, ahead of the ECB’s interest rate decision at 1315 tomorrow.

Ready to talk FX?

Get in touch with one of our friendly and knowledgeable experts to see how FX strategy can drive commercial impact in your business.

Contact us

Related
Commentary

Find out how we have helped our clients meet their hedging requirements.

Fed Issue Forward Guidance as Policy Makers Hold Rates

Thought for Thursday, benchmark policy target rate maintained by the Fed, signs of more easing than expected for US inflation, and today's events.

Conservatives Reveal Manifesto Ahead of Labour’s Launch Today

Word of the week Wednesday, manifesto from the Conservative party released yesterday at Silverstone, Labour party manifesto set to release today after making criticisms, data shows sharp decline

In Focus: America’s TCJA

Travel Tuesday, focus turns to the Tax Cuts and Jobs Act as the US election draws closer, UK unemployment data, and wage growth comes in marginally higher than expectations in the UK.

European Parliamentary Elections

Macro Monday, fallout from provisional European Parliamentary election results dominate headlines, French President calls for snap election, and what's happening today.

ECB Cut Rates as Markets Look Towards US Labour Data

Friday feeling, ECB cut rates after nine months of holding at highest level, release of US labour market data this afternoon, and rising gold prices continue.

All Eyes on ECB

Thought for Thursday, focus is on the ECB for today's announcement, vote of no-confidence for Wales's first minister, and cuts for BoC benchmark interest rates.

Key Things To Grasp | HCFX
S1; E5: Key Things To Grasp

Some tips about the global FX market.

In this FXcellence episode, we dig into a few key themes that we think it's important for our clients to know about, and also how and why the FX market operates the way it does. They say a little bit of knowledge can be a dangerous thing, but we think that the more you know, the more informed your decision making will be!

Types of Hedging Strategies | HCFX
S1; E4: Types of Hedging Strategies

How do you work out what's best for you?

In this FXcellence episode, we look at a number of approaches to hedging and the benefits and implications they offer. Getting the optimal strategy might not be achieved on day one, but you've got to start somewhere! Here's a great place to begin.

Ready to talk FX?
Get in touch today to see how FX strategy can drive commercial impact for your business.
Contact us