UK Manufacturing Shrugs Off Election Fears

Thursday: 1st June: For a change, today’s blog won’t start with politics talk, as what seems to have become the norm. Instead we turn our attention to manufacturing data in the UK. Following April’s 3-year high figure of 57.3, May’s PMI slipped to 56.7 (vs 56.5 expected). Aside from April’s figure, it is the strongest reading since June 2014. The reading shrugs off any election and Brexit-related woes, demonstrating continued improvement since a weak first quarter of 2017. The data announcement further revealed that companies wanted to hire extra staff to handle new order and increase capacity, planning to hire staff at the fastest pace in nearly 3 years. Demand from both foreign and domestic orders increased, while factories’ raw material costs continued to rise, although slower than before.

This time next week, polling stations will be open for the British public to vote. Theresa May stood by her stance and didn’t attend a 7-way political debate, televised on the BBC last night. Jeremy Corbyn was a late entry to the starting line up, but showed up, nevertheless. Polls still show a variance in gap (anything between 3-15%) between the Conservatives and Labour. As an almost “flight to safety” move by investors, the UK Debt Management Office sold an additional £2.5bn of the 1.25% 2027 Gilt. 10 Year Gilt Yields are currently yielding c.1.06%, down from a peak of 1.2% in May, making this latest issue look relatively attractive.

Six of the UK’s best known polling companies show there is a clearer consensus for next week’s Election results than what many individual polls have been suggesting. Five of the six (the six being ICM; Ipsos MORI; COmRes; Opinium; Survation and; YouGov) see a majority of at least 40 seats, with one estimated range going as high as 200. One survey company claim “the Tories will cruise home with a working majority… I don’t think there’s a possibility of Labour having any kind of majority”. It may be hard to forget the UK polls have in recent times got their predictions wrong – calling both the 2015 general election and the Brexit referendum 2016 wrong.

The pound once again reversed earlier falls to trade higher against both the euro and US dollar (+0.42% @ €1.15 and +0.17% @ $1.29 at the time of writing). The FTSE 100 closed the day +0.32%. The FTSE 250, although closing +0.19%, was weighed down by a cautious trading  outlook from First Group. The bus and rail operator recorded higher full year profits, but remain absent of any dividend returns to shareholders.