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UK manufacturing at two year high

UK manufacturing at two year high

Last week’s final reading of Q1 UK GDP revealed the fragility of the economic recovery, however, we have now seen two consecutive months of manufacturing data exceeding expectations suggesting the sector is gaining momentum. The manufacturing PMI for June rose by one point to 52.5 as both new orders and new export orders rose. The index is now at a 25 month high and Q2 should see a positive contribution to growth from manufacturing output.

Further good news for the UK outlook came as mortgage approvals rose in May to the highest level since December 2009. The Bank of England reported approvals of 58,242 up from 54,354 in April, exceeding market forecasts of 55k. Consumer credit also rose by a net £725m in May, the largest increase since December 2012, and up from £557m in April.

In the US, the ISM manufacturing index climbed back into expansion territory in June to a three month high of 50.9 aided by a more buoyant housing market and an upturn in car sales.

The final PMI reading of Eurozone manufacturing in June was revised up 0.1 point from the flash estimate to a 16 month high of 48.8. Improvements in activity were confirmed for all nations except Germany which was hit by weak overseas demand. While the index remains in contraction this is the third consecutive monthly gain suggesting the sector is stabilising, even in the periphery countries.

The positive UK data stemmed sterling’s recent losses with GBP/USD stabilising around the $1.52 level.

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