Shocked? Not so much

1 February 2011
The UK business world was sent into spasms of economic woe last week with the announcement that GDP contracted in the last three months of 2010. As you may have seen, it reduced by 0.5 per cent overall, with construction most severely hit. “Shock!” screamed the headlines. And claims of “double-dip recession” were rehashed. But was it really such a surprise? Not, I’d suggest, for the followers of the Purchasing Managers’ Indexes (PMIs), which accurately foreshadowed the sector movements, and the reasons for them, three weeks before the Office for National Statistics (ONS) figures. According to ONS data released on 25 January, UK construction was the sector that shrank the most in the final quarter of 2010. Yet, the PMI for that sector reported on 5 January the first period of contraction in 10 months. CIPS and Markit produce the figures and as we reported on the same day, a Markit spokesman attributed the fall to the bad weather and “subdued growth due to constraints in residential activity”. And it isn’t just bad news the PMI called correctly. The manufacturing index on 4 January found continued growth, reporting expansion to a “16-year high”. When the GDP figures were released manufacturing had bucked the overall trend and grew 1.4 per cent. And it was the same story for the third index – services. The December PMI found a notable monthly fall, and the GDP figures concluded similarly for the quarter. But the services figure a month earlier (and still within the ONS final 2010 quarter) had shown steady growth. This gives greater credence to the impact of bad weather in December, but not in November. And suggests the responsiveness of the monthly PMIs. All well and good you may say, but how does that help us? Access to this bellwether economic data can be invaluable in supplier negotiations and stakeholder discussions. We should capitalise on it. After all the indexes are produced for us and, indeed, the raw data is supplied by CIPS members. The PMIs don’t have the profile of the ONS numbers, but we may as well make the most of our access to them.
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