27 Feb 2015
UK February PMI’s risk lies to the downside – RBS
FXStreet (Barcelona) - Ross Walker, Senior UK Economist at RBS, previews the UK events for the week ahead, expecting UK February PMIs to print a below consensus figure.
Key Quotes
“The latest set of PMI surveys, covering February, will be influential in shaping expectations around Q1 GDP. With the economy having slowed more sharply than expected in Q4 (to 0.5% q/q), but with an unusually large drag from construction output (-2.1% q/q), the preliminary estimate of growth in the first quarter (due 28 April) will be important in shaping market expectations of the UK’s growth prospects in 2015.”
“In our view, the risks around both consensus forecasts (2.7%) and the MPC’s projections (2.9%) are to the downside. We forecast small declines in the PMIs in February, albeit leaving the indices in line with Q4 averages.”
“Our more cautious view on growth this year, vis-à-vis the consensus and BoE, rests on an expectation that investment spending will moderate further (North Sea oil, residential construction, domestic ‘political’ risk and a generally sluggish global backdrop) while fiscal tightening (further spending cuts and the prospect of tax rises) will tend to dampen demand.”
“Any significant or sustained boost from net exports (eg, >0.5pp per year) looks as elusive as ever.”
“We remain of the view that growth this year will be closer to trend (2¼%-2½%) than 3%.”
Key Quotes
“The latest set of PMI surveys, covering February, will be influential in shaping expectations around Q1 GDP. With the economy having slowed more sharply than expected in Q4 (to 0.5% q/q), but with an unusually large drag from construction output (-2.1% q/q), the preliminary estimate of growth in the first quarter (due 28 April) will be important in shaping market expectations of the UK’s growth prospects in 2015.”
“In our view, the risks around both consensus forecasts (2.7%) and the MPC’s projections (2.9%) are to the downside. We forecast small declines in the PMIs in February, albeit leaving the indices in line with Q4 averages.”
“Our more cautious view on growth this year, vis-à-vis the consensus and BoE, rests on an expectation that investment spending will moderate further (North Sea oil, residential construction, domestic ‘political’ risk and a generally sluggish global backdrop) while fiscal tightening (further spending cuts and the prospect of tax rises) will tend to dampen demand.”
“Any significant or sustained boost from net exports (eg, >0.5pp per year) looks as elusive as ever.”
“We remain of the view that growth this year will be closer to trend (2¼%-2½%) than 3%.”