- Rob Dobson, senior economist at Markit
As always the first week of each month includes three important economic reports from the U.K.– manufacturing, construction and services PMI. While the first two sectors account only around 10% each, they still have a significant impact on markets, as companies react quickly to any changes in market conditions. This time, the reaction was very impressive, with the cable plunging to 1.6639 immediately after the release of the data, while earlier the pair was trying to refresh daily's high at 1.6674.
The main reason for such a disappointing performance was weaker-than-expected manufacturing PMI released by Markit. The company said a gauge of activity in the manufacturing sector slowed to 55.3 in March, hitting the lowest since July, and down from a revised 56.2 a month earlier. Economists, however expected the figure will move further away from the 50 mark that separates growth from contraction. The main downside pressure came from exports, that fell to the lowest in 10 months.
While some can call these figures as an alarming sign, they echoes with official projections that the growth will slow in the second half of this year. Moreover, inflation fell to a fresh four-year low in February, while price pressures in manufacturing sector cooled as well.
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