Pound moves higher following a positive PMI reading, manufacturing output drops in Q1 2023
The British Pound has rallied against the Euro, Dollar and other major currencies today following better than expected economic data released this morning. The UK Composite PMI rose to 53 in February, smashing expectations for a reading of 49. This represents a significant step-up in activity on January's 48.5 reading (below 50 signifies contraction, while a reading above signals growth).
The Pound has jumped by over half a cent against the US Dollar to hit $1.21 , which is the highest since last Wednesday when it shot up as high as 1.1375 against the Euro. This latest reading could have the City calculating that stronger economic growth increases the chances of further Bank of England interest rate rises to cool inflation.
Following the PMI release this morning, the CBI Industrial trends survey dampened optimism over the UK economy, reporting that manufacturing output and orders have dropped.
The CBI’s latest health-check on UK factories has found that a net balance of 16% of manufacturers reported a drop in output volumes in the three months to February. This shows the fastest fall in manufacturing output since September 2020. This is down from -1% in the three months to January.
The survey also showed:
Output fell in 11 out of 17 sectors in the three months to February. The decrease in output reported this quarter was largely driven by the motor vehicles & transport equipment, chemicals and paper, printing & media sectors.
Total order books were reported as below “normal” in February, to a similar extent as in January (-16% from -17%).
Expectations for average selling price inflation in the three months ahead were the lowest since May 2021, having declined steadily from the multi-decade highs seen in early 2022.
Stocks of finished goods were seen as adequate in February, with the balance broadly similar to January (+9% from +12%).
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