The pound fell yesterday against the euro after Markit released its latest UK manufacturing purchasing managers index (PMI) which showed the index has fallen to an eight-month low with a figure of 55.3 in March, down from 56.7 in February.
It was not all bad news as the long term average figure is 51.4 and production and new orders continued to increase at a robust rate offering further support for future job creation. Also of interest, input prices fell for the first time in over 18 months and selling price inflation is at a seven-month low.
Rob Dobson, Senior Economist at Markit commented that “the very fact that we have a healthy manufacturing economy (goods sector) that is generating jobs at a rate rarely seen in recent decades suggests that the rebalancing process is underway”.
In the euro zone, the Eurogroup announced that it expects to release the next bailout tranche for Greece in three disbursements after noting that Athens will still have to continue forging ahead with its reforms but approved of the progress made thus far.
In a joint statement, the Eurogroup ministers stated that “The Eurogroup considers that the necessary elements are now in place to launch national procedures with a view to pave the way for the approval of the next EFSF instalment of €8.3 billion”.
Meanwhile, euro zone statistics agency Eurostat reported that the euro zone’s unemployment rate remains unchanged at 11.9% in February with unemployment in Germany unchanged at 5.1% but French and Italian unemployment edged higher to 10.4% and 13% respectively.
In the US, data showed a pick-up in manufacturing growth in February and construction spending unexpectedly improved in February after a contraction in January. This helped the US dollar regain some of its recent losses ahead of the important non-farm payroll employment data announcement due on Friday.
Earlier in the day, China reported that its manufacturing purchasing managers' index (PMI) hit an eight-month low, further raising expectations that the Chinese government will have to provide further stimulus measures to support its economy and reach its growth rate target for the year.
HSBC Chief Economist Hongbin Qu pointed out that the data “confirmed the weakness of domestic demand conditions” and suggested that first quarter GDP growth is likely to miss the government's 7.5% target.