UK: Economic sentiment improving? - RBS

Analysts at RBS point out that the UK private sector slowed to a 20-month low in March, accompanied with much harking at the weather and foretelling of April’s strong rebound and as the weather improved but the services and construction PMIs underwhelmed.

Key Quotes

“Services activity did rise, to 52.8, but that’s still the second-weakest reading since September 2016 and well below the long-term average. Construction returned to growth in April (52.5), largely driven by a surge in housing activity. But new orders flirted with stagnation. Still, firms are optimistic about the year ahead. Let’s hope this sentiment is not misplaced.”

“According to the PMIs, manufacturing was the fastest growing sector amongst the trio of UK surveys last month. Yet it was the only sector not to post faster rates of growth in April. Overall activity slowed to a seventeen-month low of 53.9.  And this despite its poor performance in Q1. Growth in output, employment and order books all eased last month. However, unlike with construction and services, optimism amongst manufacturers is waning. Concerns over Brexit and Trump-induced trade barriers aren’t going to disappear anytime soon.”

“If credit’s the oil that keeps the economic machine running smoothly, the latest Bank of England data show the lubricant’s wearing thin. Consumer credit growth, running at around 10% for most of the last two years, slowed to 8.4% in March. Auto finance is part of the reason. New car registrations are down 9% so far this year and when around 9 out of 10 new cars are sold on credit that slowdown makes a difference. Credit card borrowing also cooled, to 8.8%, as consumers were less keen to ‘whack it all’ on plastic. Consumers are showing a little more caution.”