Manufacturing solid, exports weak
UK manufacturing was growing slightly above its longer run average as we move into the third quarter with consumer goods the main reason for the positivity. The most telling statistic within the release however is the 4th consecutive month of declines in export orders. The rise of sterling of around 13.5% against the euro in the past 12 months has damaged manufacturing competitiveness in the UK’s largest market.
Growth in the UK remains positive in the longer term and increases in employment, lower costs, expanding order books and decent stock levels are all encouraging looking forward. The sector could do with a weaker sterling however to insulate it somewhat.
Europe manufacturing steady, Greece weighs
Europe’s manufacturing isn’t breaking any records. With just a few exceptions it remains in expansion. Out of the major economies, only France remains in contraction and only just, while Germany and Italy continue to expand. Greece has sunk further into the mire with manufacturing falling to 30.2 from 46.9 as the fallout continues.
Greek stock markets reopened yesterday which led to bank shares tumbling as uncertainty remains about its liquidity ahead of the agreement of a third bailout. It remains to be seen whether we have found a base and will see a bounce today – we finished 16% down on the main index, having seen lows of 23% down.
Commodities lower, but Australia holds rates
Commodity prices continued recent slides yesterday, which were down again today. Brent crude fell below $50 a barrel for the first time since January with copper, aluminium and gold all lower. Despite this the Aussie dollar was higher on the back of stronger than expected retail sales figures and the RBA announcement where no change was expected – and no change it was. The one piece of news within the statement was comment around the level of the Australian dollar.
Meanwhile, US data was mixed with personal income and personal spending rising, which is positive news to the Fed on the consumption side. On the leading indicators, purchasing manager index figures fell, though remains in expansion, and employment fell to 52.7 from 55.5 last month. Prices paid also fell sharply leaving the Fed having to look in their crystal ball to see inflation ahead of raising rates.