UK Manufacturing PMI Survey: Partial rebound coming – RBS

Research Team at RBS, suggests that after a hefty fall in July in the aftermath of the referendum vote to leave the EU they are looking for a partial rebound in the UK manufacturing PMI in August, to 49.0.

Key Quotes

“July’s 48.2 outturn is hardly uncharted territory and we expect lower levels to be reached during the next few quarters. However, such moves are rarely linear and other high ­frequency indicators suggest some risks of a rebound in August – albeit only a partial one. The Lloyds Business Barometer, which had slumped to a 4½­year low of 6 in June, rebounded to 29 in July, still a little below its 37 average during the first five months of the year but taking back most of the decline sustained in the aftermath of the Brexit vote.

A modest rebound in the UK PMI surveys in August would not suggest that the UK’s medium­term outlook has improved materially. The economy was never going to disintegrate within a month or two of the referendum. Brexit will be more of a slow burn as capex is scaled back and, with a lag, deteriorating employment trends dampen consumer demand. We continue to characterise the UK outlook more as a period of persistent sub­trend growth rather than a financial crisis­style collapse.”