Upbeat manufacturing data has helped push UK equities higher again as commentators increasingly suggest the economy may be growing by the autumn and even the long-term bears are running out of reasons to be miserable.Coming in at 45.4 in May, the seasonally adjusted CIPS/Markit Purchasing Managers’ Index remained below the no-change mark of 50.0 for the thirteenth successive month. But it also posted it third consecutively monthly rise - from an upwardly revised figure of 43.1 in April - and is now at its highest level for 12 months.
'At this rate we would hit the no-change 50.0 PMI benchmark by autumn – significantly earlier than economists initially predicted,' said Roy Ayliffe, director at the Chartered Institute of Purchasing & Supply. Production and new orders continued to decline in May, but at the slowest rates for twelve and fourteen months respectively and the orders-to-inventory ratio rose to a thirty-two month high - which is why Ayliffe and others are suggesting their could be economic growth within three months.
The news comes on the back of an upbeat report from the Engineering Employers Federation.
James Knightly, economist at ING, a long time bear on the UK economy, says even he might have to review his forecasts. 'Despite our worries concerning the impact of the bursting of the house price bubble and the implosion of the banks on a household sector that is the most indebted in the world, it appears that the slashing of interest rates and support from quantitative easing is generating a tangible improvement in the economy,' he says. He still sees a number of reasons to be cautious and thinks the leap in PMI may in part be down to re-stocking that could soon run out of steam. Nonetheless, he thinks today's data is another strong argument to start being less pessimistic about the UK.
James Knightly, economist at ING, a long time bear on the UK economy, says even he might have to review his forecasts. 'Despite our worries concerning the impact of the bursting of the house price bubble and the implosion of the banks on a household sector that is the most indebted in the world, it appears that the slashing of interest rates and support from quantitative easing is generating a tangible improvement in the economy,' he says. He still sees a number of reasons to be cautious and thinks the leap in PMI may in part be down to re-stocking that could soon run out of steam. Nonetheless, he thinks today's data is another strong argument to start being less pessimistic about the UK.
Howard Archer, UK economist at IHG Global Insight agrees today's data is clearly good news and boosts hopes that the economy could start growing before the end of the year. Earlier, better than expected Chinese PMI data helped lift the mood on global markets. All eyes are now on the US ISM figures.
If - as expected - they come in with a positive number, an increasing number of market watchers might be arguing the recession is over in the US and that will boost hopes we'll be back in growth mode by the end of the summer.
Source: Citywire
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