Britain reported some pretty crappy manufacturing numbers on Monday.
The Markit/CIPS UK manufacturing PMI came in at 51.9, against a forecast of 52.7. Anything above 50 signals growth, while anything below means contraction.
It was particularly disappointing because European manufacturing as a whole did better than expected. Even Greece did well — kind of.
Greece’s factories returned to growth for the first time since May 2014 and Italy and Germany both beat forecasts. Spain and France are both holding up pretty well.
Britain, then, looks like the laggard at the back of the pack. But it’s not all bad news — there was actually a bright spot amongst the gloomy data.
Britain’s small to medium enterprises (SMEs) are reporting greater orders and better sentiment than the country’s incumbent companies — the big companies.
Francois Cabau and his team at Barclays pointed out:
Furthermore, we note that a difference in this release, in contrast with the two previous releases, is that SME sentiment was now stronger than larger firms’ sentiment.
In particular, SMEs reported stronger new orders compared with larger firms.
On new orders, it appears that export-driven orders continue to pick-up at the expense of domestic-driven orders, although according to the Markit press release, firms did report an easing in export orders growth compared with previous months.
Here’s the corresponding chart:
Basically, Britain’s smaller businesses are busy and future orders seem robust. It’s just the biggest companies that are reporting a decline in orders.
However, the team at Barclays warned that Britain’s manufacturing sector is still on fragile ground (emphasis from the bank):
Nonetheless, we remain cautious on manufacturing in light of a lack of broad-based continued improvement in sentiment.
This was further echoed in the Q4 2015 EEF Manufacturing Outlook (released 7 December 2015) in which they downgraded their 2015 and 2016 manufacturing growth forecast to -0.1% (-0.8pp) and 0.8% (-1.0pp) respectively.