UK Manufacturing Activity Slows to 17-Month Low
LONDON (Financial Times) - Activity among Britain’s manufacturers slowed to its lowest level in 17 months in September, suggesting a rapid cooling of expansion in the sector, according to the latest purchasing managers’ index (PMI) published on Wednesday by the consultancy Markit.
The figures, which were weaker than expected, showed manufacturers reporting output growth and new orders no higher than the long-run average. The employment component of the index, however, remained strong.
The index, which has tracked the official manufacturing output figures in recent months, suggests that the revival in the manufacturing sector, accounting for roughly 10 per cent of Britain’s economy, will be relatively shortlived.
Although the economy is now 2.7 per cent larger than at the 2008 peak, manufacturing output still languishes 4.5 per cent below its pre-crisis peak.
The Markit manufacturing PMI index dropped from 52.2 in August to 51.6 in September, having been as high as 57 as recently as April this year. The long-run average of the series is 51.5, indicating manufacturing activity and growth is close to its long-run trend, suggesting little growth as the sector has declined in importance for the UK economy.
"The strong upsurge in UK manufacturing sector at the start of the year appears to have run its course,” said Rob Dobson of Markit. He predicted that the 0.5 per cent manufacturing output growth in the second quarter was "likely to creep closer to the stagnation mark in the third quarter”.
The overall activity index was pulled lower by companies reporting weaker increases in production, new business and new export orders, dragged lower by geopolitical concerns and September’s Scottish referendum.
James Knightley of ING said these considerations were likely to have affected manufacturing orders and any firm conclusions about Britain’s manufacturing would need to wait until the October figures.
"One possibility is that the uncertainty generated by the close polls in the lead-up to the Scottish independence referendum made business cautious and therefore led to a delay in orders,” he said.
Despite the weakness in the survey, many economists do not think it marks the end of the UK’s recent economic upswing. Paul Hollingsworth of Capital Economics said: "The high level of consumer confidence and survey measures of firms’ investment intentions suggest that the domestic recovery should be strong enough to support modest growth in manufacturing output over the next year or so.”
While the Bank of England and the government will not be too concerned by the recent downward trend in manufacturing, any sign that weakness is spreading to the service sector and hard data from official sources will give the central bank more reasons not to start to raise interest rates.
Myanmar Opens Doors to Foreign Banks
Myanmar has opened its doors to foreign banks for the first time in half a century, awarding nine trading licenses to institutions from across Asia in its latest effort to draw foreign investment to its once-isolated economy.
Japan’s "megabanks” scooped a third of the preliminary permits while western banks mostly stayed away, in a sign of Tokyo’s ambitions and the reticence of US and European companies still nervous about falling foul of international sanctions.
The Myanmar licenses are highly restrictive but also an important foot in the door for businesses wanting to tap a market of more than 50m people that is building industries almost from scratch and is a gateway between southeast Asia, China and India.
Japan’s Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group all secured trading permits, under which foreign institutions must bring in a minimum $75m of capital and restrict themselves initially to a single branch offering only corporate and wholesale banking.
The other successful bidders in the revival of a foreign banking sector nationalized by the military junta that took power in 1962 are Singapore’s UOB and OCBC, ICBC of China, Thailand’s Bangkok Bank, May bank of Malaysia and Australia’s ANZ.
Mitsubishi said it was "delighted”, adding that it would open a branch after April, and had not ruled out forming a joint venture with a local bank. ANZ said it expected to start operations under the new license in June, focusing on trans-Asian trade and investment flows.
"Given its size, economic potential and its strategic position between China and India, Myanmar is forecast to be one of the fastest growing economies in the region over the medium term,” said Andrew Géczy, ANZ’s chief executive for international and institutional banking.
The winners were mostly as expected, although analysts noted Japan’s success at a time when it was focusing on Myanmar through its support for projects such as the Thilawa industrial zone.
Ryutaro Hatanaka, commissioner of Japan’s Financial Services Agency, has twice visited Myanmar in the past year, while the FSA this year signed an agreement to help the country develop a legal and regulatory framework covering securities, insurance and microfinance.
Romain Caillaud, Myanmar director for Vriens & Partners, the consultancy, said the government had "bet on size” by picking the megabanks and had also "given a significant nod to Japan”.
"Japan has been a large investor as Myanmar has opened its economy but is still overshadowed by South Korea, and by China and Thailand,” Mr Caillaud said in a client note. "The fact that Korean banks were shut out entirely is surprising given the size of Korea’s stake in the country.”
The figures, which were weaker than expected, showed manufacturers reporting output growth and new orders no higher than the long-run average. The employment component of the index, however, remained strong.
The index, which has tracked the official manufacturing output figures in recent months, suggests that the revival in the manufacturing sector, accounting for roughly 10 per cent of Britain’s economy, will be relatively shortlived.
Although the economy is now 2.7 per cent larger than at the 2008 peak, manufacturing output still languishes 4.5 per cent below its pre-crisis peak.
The Markit manufacturing PMI index dropped from 52.2 in August to 51.6 in September, having been as high as 57 as recently as April this year. The long-run average of the series is 51.5, indicating manufacturing activity and growth is close to its long-run trend, suggesting little growth as the sector has declined in importance for the UK economy.
"The strong upsurge in UK manufacturing sector at the start of the year appears to have run its course,” said Rob Dobson of Markit. He predicted that the 0.5 per cent manufacturing output growth in the second quarter was "likely to creep closer to the stagnation mark in the third quarter”.
The overall activity index was pulled lower by companies reporting weaker increases in production, new business and new export orders, dragged lower by geopolitical concerns and September’s Scottish referendum.
James Knightley of ING said these considerations were likely to have affected manufacturing orders and any firm conclusions about Britain’s manufacturing would need to wait until the October figures.
"One possibility is that the uncertainty generated by the close polls in the lead-up to the Scottish independence referendum made business cautious and therefore led to a delay in orders,” he said.
Despite the weakness in the survey, many economists do not think it marks the end of the UK’s recent economic upswing. Paul Hollingsworth of Capital Economics said: "The high level of consumer confidence and survey measures of firms’ investment intentions suggest that the domestic recovery should be strong enough to support modest growth in manufacturing output over the next year or so.”
While the Bank of England and the government will not be too concerned by the recent downward trend in manufacturing, any sign that weakness is spreading to the service sector and hard data from official sources will give the central bank more reasons not to start to raise interest rates.
Myanmar Opens Doors to Foreign Banks
Myanmar has opened its doors to foreign banks for the first time in half a century, awarding nine trading licenses to institutions from across Asia in its latest effort to draw foreign investment to its once-isolated economy.
Japan’s "megabanks” scooped a third of the preliminary permits while western banks mostly stayed away, in a sign of Tokyo’s ambitions and the reticence of US and European companies still nervous about falling foul of international sanctions.
The Myanmar licenses are highly restrictive but also an important foot in the door for businesses wanting to tap a market of more than 50m people that is building industries almost from scratch and is a gateway between southeast Asia, China and India.
Japan’s Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group all secured trading permits, under which foreign institutions must bring in a minimum $75m of capital and restrict themselves initially to a single branch offering only corporate and wholesale banking.
The other successful bidders in the revival of a foreign banking sector nationalized by the military junta that took power in 1962 are Singapore’s UOB and OCBC, ICBC of China, Thailand’s Bangkok Bank, May bank of Malaysia and Australia’s ANZ.
Mitsubishi said it was "delighted”, adding that it would open a branch after April, and had not ruled out forming a joint venture with a local bank. ANZ said it expected to start operations under the new license in June, focusing on trans-Asian trade and investment flows.
"Given its size, economic potential and its strategic position between China and India, Myanmar is forecast to be one of the fastest growing economies in the region over the medium term,” said Andrew Géczy, ANZ’s chief executive for international and institutional banking.
The winners were mostly as expected, although analysts noted Japan’s success at a time when it was focusing on Myanmar through its support for projects such as the Thilawa industrial zone.
Ryutaro Hatanaka, commissioner of Japan’s Financial Services Agency, has twice visited Myanmar in the past year, while the FSA this year signed an agreement to help the country develop a legal and regulatory framework covering securities, insurance and microfinance.
Romain Caillaud, Myanmar director for Vriens & Partners, the consultancy, said the government had "bet on size” by picking the megabanks and had also "given a significant nod to Japan”.
"Japan has been a large investor as Myanmar has opened its economy but is still overshadowed by South Korea, and by China and Thailand,” Mr Caillaud said in a client note. "The fact that Korean banks were shut out entirely is surprising given the size of Korea’s stake in the country.”