According to flash data, the UK PMI manufacturing index declined to an 11-month low of 56.9 for January from 57.9 in December. The manufacturing output index, however, strengthened to a 5-month high while there was a slight easing of cost pressures. The PMI services-sector index also retreated to an 11-month low of 53.3 from 53.6 and slightly below consensus forecasts. There was, however, a strong increase in orders growth for the month while there were strong inflationary pressures with input costs and selling prices both registering the second-highest readings on record which will maintain underlying speculation over Bank of England tightening. The overall data impact was limited given expectations that an easing of coronavirus restrictions would lead to stronger conditions in the short term. Sterling, however, continued to lose ground with the UK currency hurt by a fresh slide in risk appetite and sharp losses in equity markets.
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The German manufacturing PMI index strengthened to 60.5 for January from 57.4 previously with the services index in expansion territory at 52.2 from 48.7 and both figures above consensus forecasts. The Euro-zone manufacturing index also strengthened to 59.0 from 58.0 and above expectations, but the services-sector index was below expectations at 51.2 from 53.1 previously. There was further upward pressure on costs with services selling prices increasing at the fastest rate on record. In its monthly report, the Bundesbank stated that inflation will remain exceptionally high in early 2022 while manufacturing remains constrained by supply disruptions. ECB council member Villeroy stated that the central bank was ready to do whatever it takes to get inflation back below 2%. Markets expectations of an ECB rate hike were, however, pushed back again. The Euro was also hampered by underlying concerns over the Ukraine situation.
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The US manufacturing PMI index dipped to a 15-month low of 55.0 for January from 57.7 previously and below consensus forecasts of 56.7. The services index also declined sharply to an 18-month low of 50.9 from 57.6 previously and below market expectations of 55.0. There was an easing of order backlogs for the month. Companies were hampered by a fresh surge in coronavirus cases supply-chain difficulties and staff shortages. There was an easing of cost pressures within the manufacturing and services sector for the month with the data triggering some doubts over the US outlook.
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