Latest data released by Markit/CIPS - 23 June 2020

  • Prior 29.0
  • Manufacturing PMI 50.1 vs 45.0 expected
  • Prior 40.7
  • Composite PMI 47.6 vs 41.2 expected
  • Prior 30.0

A solid beat in terms of the headline readings and that should help keep risk trades more happy for the time being. Notably, the manufacturing print returns back to 'contraction' territory but the much like the recent reports, the devil lies in the details.

The more solid beat in manufacturing is linked to the reopening of plants but total new orders continue to see a further slump in June.

Underlying demand was reported to still be very subdued and cutbacks by client spending continue to act as a drag on overall business activity, with new work falling for a fourth straight month - though the pace of decline has eased.

Meanwhile, employment numbers fell once again but less rapid than that seen in May.

Markit notes that:

"June's PMI data add to signs that the economy looks likely return to growth in the third quarter, especially given the further planned easing of the lockdown from 4th July. June saw a record rise in the PMI for a second successive month, confirming that the economy is moving closer to stabilising after the worst of the immediate economic impact from the COVID-19 pandemic was felt back in April.

"However, while confidence is rising that the economy will soon return to growth as the lockdown continues to ease, the longer term recovery prospects remain highly uncertain. Some of the recent gains in the PMI reflect short-term bounces as businesses returned to work, but demand clearly remains weak, as indicated by a further steep decline in backlogs of orders and an ongoing fall in new orders. Many COVID-19 restrictions and social distancing measures will also need to stay in place until an effective treatment or vaccine is available, curbing demand in a variety of service sectors in particular.

"Uncertainty over recovery prospects and job prospects also mean demand for many goods, especially non-essential bigticket items, is likely to remain weak for many months, with Brexit uncertainty also continuing to cast a shadow over the economy.

"Our forecasting team therefore expects the economy to contract by 11.9% this year before expanding by a relatively modest 4.9% in 2021, which is far more cautious than the 15% surge anticipated in 2021 by the Bank of England."