Manufacturing Snapshot
Strait of Hormuz closure continues to weigh heavily on business confidence
There are clear signs fuel price increases are resulting in reduced consumption of goods and services, and business margins are under obvious pressure.
The headline PMI and production index still both have their heads above water but they are also both seeing an accelerated decline
Even more disconcerting are the indicators that could loosely be described as foretelling future production. While the production index sat at 51.7 new orders slumped from 55.0 to just 48.2 suggesting that new orders are in outright decline.
Perhaps even worse is that deliveries of raw materials slumped to 46.5, the lowest since July 2024
If the inputs required to produce outputs are not in the factory, then future output will be impeded.
Employment is often a lagging indicator so the apparent strength may reflect decisions made to hire preceding the Middle Eastern conflict
We have recently revised upward our expectations for the unemployment rate on the back of downgrades to our growth forecasts. It will be interesting to see whether this decision is supported by future PMI readings.
