UK manufacturing PMI plunges at second fastest pace in 20 years – so will the Bank of England print next week in response?

Chalk up another bad data point to get those central planners at the Bank of England trigger happy with their photocopying fingers. Today’s manufacturing PMI was about as bad as it gets. Expectation were for a (still contractionary) 49.7 print, the actual number came in at 49.5. From the report:

  • UK Manufacturing PMI at 45.9 in May, from 50.2 in April
  • New orders drop at fastest pace since March 2009
  • Manufacturers cut back output, employment, purchasing and inventories

The UK manufacturing sector took a sudden sharp turn for the worse in May. Companies scaled back production and employment as inflows of new business declined at the steepest pace since March 2009, amid rising uncertainty among domestic and overseas clients.

At 45.9 in May, down from 50.2 in April, the seasonally adjusted Markit/CIPS UK Manufacturing Purchasing Managers’ Index® (PMI®) fell to its lowest level for three years and below the neutral 50.0 mark for the first time since last November. The headline index fell by 4.3 points over the month, the second-steepest fall in its 20-year history.

[emphasis ours]

And here is what a £325bn money printing by the BoE buys you these days:

And this paragraph probably seals the fate of money printing either next week, or next month:

Price inflationary pressures eased during May, with rates of increase in input costs and selling prices both slowing over the month. Companies reported higher costs for food products, timber, and transportation, but also mentioned that exchange rate effects and lower commodity prices had subdued input price increases. Meanwhile, strong competition and weak demand meant that selling prices rose only slightly.

[emphasis ours]

With plunging manufacturing output and falling input prices the BoE will probably read the tea-leaves and decide this is the final data point they need to green-light more money printing. We wonder if ANYONE at the BoE will ask the rather glaringly obvious question:

“the economy has got much worse as we’ve increased the rate of printing – maybe the money printing isn’t the solution but rather a major factor in CAUSING the downturn?”

We some how doubt this will be asked out loud, but we’re sure that it at least might fire into the synapsis of some members, albeit very briefly.

The BoE meet next week to decide on whether to print or not – after today’s report we’d say the odds of more money printing (£25-50bn) at next week’s meeting are now better than evens.

Link to this article: : http://www.goldmadesimplenews.com/gold/uk-manufacturing-pmi-plunges-at-second-fastest-pace-in-20-years-so-will-the-bank-of-england-print-next-week-in-response-7063/

Posted by on Jun 1 2012. Filed under Analysis, Gold News, Markets. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.

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