Jibun Bank / Markit preliminary PMIs for May
Joe Hayes, Economist at IHS Markit:
- “Latest PMI data provide yet another shocking insight into the devastating impact of the COVID-19 outbreak. While the rate of decline in services activity has eased very slightly, plummeting demand for goods is finally catching up with the manufacturing sector, which posted an accelerated decline in production during May.
- “Taking the April and May PMI surveys together, we see that both are indicative of GDP falling at an annual rate in excess of 10%. It is clear that the economy is going to contract for a third successive quarter, with the hit to Q2 likely to be potentially as large as 20% on the previous year.
- “Nevertheless, the dynamics in the economy are clearly evolving. As Japan eases the state of emergency measures, the services economy can begin its gradual recovery. However, the damage to the manufacturing sector could continue to worsen as global trade conditions deteriorate and the global economic recovery is slow.”
Latest data released by Markit – 6 May 2020
Construction activity in the UK crashes to an all-time low last month as clients freeze spending plans amid the fallout from the virus outbreak and business shutdowns. The real worry here is that this could lead to long-term disruptions and cause construction activity to be more subdued for a longer period than the drop seen in April. Markit notes that:
“The rapid plunge in UK construction output during April stands out even in a month of record low PMI data for the manufacturing and service sectors. Widespread site closures and business shutdowns across the supply chain meant that vast swathes of the construction sector halted all activity in response to the COVID-19 pandemic.
“Around 86% of survey respondents reported a fall in business activity since March, while only 3% signalled an expansion. House building and commercial work were unsurprisingly the hardest hit, but civil engineering activity also fell at by far the fastest pace since the survey began in April 1997.
“A drop in construction activity of historic proportions in April looks set to be followed by a gradual reopening of sites in the coming weeks, subject to strict reviews of safety measures.
“However, the prospect of severe disruption across the supply chain will continue over the longer-term and widespread use of the government job retention scheme has been needed to cushion the impact on employment. Looking ahead, construction companies widely commented on worries about cash flow, rising operating costs and severely reduced productivity, as well as a slump in demand for new construction projects.”
Eurozone-wide manufacturing data for November has met forecasts, reaching their best level since June 2011 as national-level numbers from the sector also beat expectations.
The Markit purchasing managers’ index survey for the shared currency area came in at 51.6, just ahead of the 51.5 predicted in a poll undertaken by Reuters.
Any reading above 50 indicates growth.
The recovery in the eurozone manufacturing sector accelerated again in November. Although the pace of expansion remained modest overall, the real positives were that growth extended into a fifth successive month with the rate of increase hitting a near two-and-half year high.
At national level: