The UK PMI manufacturing index edged higher to a 3-month high of 58.2 for November from 57.8 previously and above consensus forecasts of 57.3. The services-sector index declined marginally to 58.6 from 59.1, in line with expectations. Sterling failed to gain from the data with fresh 2021 lows against the dollar. Bank of England MPC member Haskel stated that a gradual increase in interest rates would represent a return to normal. He noted that labour-market developments would be very important and that the bank needs to be vigilant about rising labour costs. In particular, he noted the risk that wages increases increase at a faster rate than productivity which would put upward pressure on inflation. Nevertheless, he still expressed reservations over an early move to hike rates. Bank Governor Bailey also commented that the labour market is very tight and he also warned that the bank may not give significant forward guidance in the future.
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The French PMI business confidence data was stronger than expected for November and German data also beat expectations with the composite output index strengthening to 52.8 for November from 52.0 previously and above consensus forecasts of 51.0. The Euro-zone PMI manufacturing index edged higher to 58.6 for November from 58.3 and above expectations of 57.3. The services sector also confounded expectations with a net gain to a 3-month high of 56.6 from 54.6 in October. There were further strong gains in employment and order backlogs increased, although overall business confidence dipped to a 10-month low. There was a record increase in input costs for the second month running while selling prices increased at the fastest rate for close to 20 years. ECB Council member Knot stated that current supply-side shocks may not be temporary and that the central bank is likely to stop emergency bond purchases in March 2022. The Eurozone data provided an element of relief, but the Euro was still hampered by unease surrounding coronavirus developments.
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The US PMI data was mixed as the manufacturing index strengthened to a 2-month high of 59.1 rom 58.4, but the services-sector component dipped to a 2-month low of 57.0 from 58.7. There was a further increase in order backlogs while companies continued to face severe supply-side difficulties with further deterioration in vendor performance and persistent labour shortages. Manufacturing costs increased at the strongest rate since the survey began with selling prices increasing at the second-fastest rate on record. The increase in service-sector prices was also the highest on record as companies looked to pass on cost increases. The data will maintain concerns surrounding inflation pressures in the economy with further pressure for the Federal Reserve to tighten policy at a faster rate.
Key Data
13.30 Durable Goods Orders (Oct) Exp. 0.2% Prev. -0.3%
13.30 Nondefense Capital Goods Orders ex Aircraft (Oct) Exp. 0.6% Prev. 0.8%
13.30 Gross Domestic Product Annualised (Q3) Exp. 2.1% Prev. 2%