November 24, 2022

Daily Report 24/11/2022

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According to the flash data, the UK PMI manufacturing index was unchanged at 46.2 for November and above consensus forecasts of 45.7 while the services-sector index was also unchanged at 48.8 and above expectations of 48.0. Overall business confidence recovered slightly amid an easing of political uncertainty, but it was still the second-weakest reading on record with notable pessimism in the manufacturing sector. Input prices continued to increase strongly, but output prices increased at the slowest rate since August 2021 due to weak demand conditions. The data overall provided some relief given fears that there would be a further and sharper downturn. The UK Supreme Court ruled that the Scottish Parliament did not have the authority to hold a second independence referendum without the approval of the Westminster government. Although the long-term situation remains unresolved, there is no real prospect that SNP plans for a referendum next year will go ahead which provided an element of Sterling relief. Sterling secured a net advance and gains accelerated after the New York open, especially after the US data.

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The French PMI manufacturing index beat consensus forecasts, but the services-sector data was weaker than expected with both in contraction territory. The German manufacturing and services indices were both slightly stronger than expected, but also remained firmly in contraction territory. The Euro-Zone PMI manufacturing index recovered to a 2-month high of 47.3 for November from 46.4 previously and above consensus forecasts of 46.0. The services index was unchanged at 48.6 and slightly stronger than market expectations. Overall business sentiment has remained in contraction territory for five months and overall business confidence remained very fragile, but with some relief over the data. There was an easing in supply-chain pressures while inflation pressures moderated.

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According to flash data, the US PMI manufacturing index declined to a 30-month low of 47.6 for November from 50.4 previously and below consensus forecasts of 50.0. The services-sector index also retreated to a 3-month low of 46.1 from 47.8 and below expectations of 47.9. Excluding the initial pandemic period, there was the sharpest decline in new orders since 2009. There was a significant easing of inflation pressures with output prices increasing at the slowest rate for just over two years. Minutes from November’s Federal Reserve meeting recorded that a substantial majority of policymakers agreed that it would likely be appropriate to slow the pace of rate hikes soon. Some members also expressed concerns over the risk to financial stability if the central bank pushed ahead with strong rate increases.

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