Monday 19 February 2018

Daily Market Update: UK construction weakest for 7 years


Richard Ramsey

The UK's construction industry experienced its weakest performance for seven years last month.

The Markit construction purchasing managers' index fell to 46.0 in June versus an expected 50.50, its lowest level since June 2009. It had been 51.2 in May. Most of the data for the survey was collected before the 23 June referendum in which the UK voted to leave the EU. Markit said a number of firms had commented on reluctance among clients to commence new contracts in the run-up to the referendum, as well as continuing uncertainty about the general economic outlook. In a further reshaping of UK politics, Nigel Farage stepped down as leader of UKIP after realising his ambition to win a vote for Britain to leave the EU. Farage told reporters, “I have never been and never wanted to be a career politician. My aim in being in politics was to get Britain out of the European Union”.

In the Euro Zone, the Sentix investor confidence index was released and fell to an 18 month low in July, as investors fear about the economic fallout following Britain’s vote to leave the EU. The survey of 1,056 investors was conducted between June 30 and July 2 and showed a reading of 1.7 from 9.9 in June. Analysts had expected a reading of 5. Elsewhere in the Euro Zone, the producer price index rose more than expected in May, posting this year’s highest increase, driven mainly by higher energy prices. PPI increased 0.6% mom from -0.3% previously. In Spain the number of unemployed people fell by the most in almost two years in May, fuelling optimism over the health of the euro zone’s fourth largest economy. Spain’s employment ministry said the number of unemployed people declined by 124,300 last month, compared to expectations for a drop of 74,300.

Closer to home, tax receipts in Ireland for the year are now €742 million ahead of target according to the latest exchequer returns. The public finances are continuing to benefit from a surge in corporation tax, which came in at €2.67 billion for the six month period to the end of June, €505 million or 19% above profile.

There was no US data due to Independence Day.

Overnight Chinese Caixin services PMI for June rose to 52.7 from 51.2 in May.

To the day ahead and in the Euro Zone we get the services and composite PMI at 9am, analysts expect 52.40 and 52.80 from 53.30 and 53.10 respectively. Retail sales for May are published at 10am and expectations are for the annual pace of growth to tick up from 1.4% to 1.7%.

In the UK we also get services PMI with a figure of 52.70 expected following 53.50 in May. At 10:30 the Bank of England publishes the financial stability report and this is followed by another press conference by Mark Carney, which will be closely watched. At his last press conference (Thursday the 30th June) sterling came under pressure after he highlighted that “some monetary policy easing will likely be required over the summer”. Also today the process for narrowing down the field of candidates for the UK conservative party leadership and the job of Prime Minister gets underway. Secret ballots will be held every Tuesday and Thursday (the candidate with the fewest votes will be eliminated at each ballot) until the party's 330 MPs whittle the five contenders down to two. These two will then go forward to a vote of the entire Conservative membership.

At 3pm US factory orders are released, there were steady advances in March and April of 0.6% and 1.9%, however analysts expect this could have slipped by 0.8% in May. The day’s economic events are rounded off at 19:30 when the Fed’s William Dudley speaks on the local economy in New York.

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