A far larger drop than expected in the most recent data from the construction sector has served to reaffirm the feeling that the UK economy is slowing down, coming on the back of last week’s soft manufacturing print.
A PMI reading of 50.6 is still above the 50 mark that a move below would signal a contraction, but compared to a median forecast of 52.5 and a prior reading of 52.8 it is clearly on the soft side. This metric has been pretty strong of late, with only 2 of the past 9 coming in below the expected level before today’s drop.
The construction PMI has pulled back of late and is now once more back near the 50 mark which denotes expansion/contraction.
Source: XTB Macrobond
The release marks the lowest reading in 10 months and with Brexit uncertainty showing little sign of abating anytime soon, there could be more bad news ahead. Tomorrow’s service sector release is widely seen as the most important of the three PMI numbers, and if there’s further disappointment there then we could get a further pullback in the pound which has dropped back near to its lowest level in over a week this morning and trades around $1.3050 at the time of writing.
Crude Oil moves up to 2019 high
There’s been further gains seen in the oil markets this morning, with both Brent crude futures and US West Texas Intermediate (WTI) chalking up their highest levels of the year so far.
The gains come on the back of a strong end to last week, which saw both benchmarks gain around 3% on Friday as traders are once more betting on a tightening of supply in the markets. Production from OPEC members fell at its fastest pace in two years during the month of January and while Venezuelan output reportedly increased last month, the recent political turmoil threatens to curtail supply going forward.
A further positive development for crude oil bulls was a fall in the number of rigs operating in the US, which dropped to 847 and marks an 8-month low. After a dramatic plunge of around 40% in the final quarter of last year, the oil market appears to have regained its footing and should these developments persist and cut supply further then there’s ample room for further upside going forward.