The seasonally adjusted Barclays Purchasing Managers’ Index (PMI) reversed October’s loss and rose by 2.4 points to 48.3 index points in November. Despite the uptick, this was the fourth straight month that the index stayed below the neutral 50-point mark, suggesting that factory sector output growth remains under pressure.
In addition, the average for the first two months of the fourth quarter is 1.8 points below that of the third quarter. In the absence of official data for the fourth quarter, the PMI suggests that output is likely to remain subdued after a 1.3% quarter-on-quarter contraction in manufacturing production in the third quarter.
Two of the key subcomponents of the headline PMI showed an encouraging improvement in November. Most notable is the 6.9-point increase in the new sales orders index to 51.4 index points. Higher export orders likely drove this improvement with local (consumer) demand remaining under pressure. Increased orders helped lift the business activity index to 48.9 index points in November, up from 43.5 in October.
Despite the improvement, the business activity index has now been below 50 for five straight months. Also lingering below 50 points is the inventory index which fell by a further 2 points to 45.2 in November.
On a positive note, this means that the new sales orders index outstripped the inventories index, resulting in the PMI leading indicator edging above 1 – this usually bodes well for production going forward. Overall, purchasing managers were also slightly more upbeat about business conditions during the first half of 2017. The index measuring expected business conditions in six months’ time rose by 3.3 points to 53.9 in November after plunging by 13.2 points in the previous month.
After moving lower for four consecutive months, the price index reversed the trend and rose to 65.6 points in November, up from 59.4 in October. The increase was likely driven by the hefty fuel price hike at the start of November, but the expected fuel price decline in December could alleviate some of the upward pressure on costs