UK's PMI likely to have stayed weak in May, bringing Q2 growth down

The group of PMIs for the UK that will be released this week for the month of May are expected to remain weak. The UK manufacturing PMI had dropped to 49.2 in April, the first reading below the threshold of 50 since March 2013. This is quite worrisome as the euro area PMI is hovering around the 51.5 mark.

This suggests that the weakness in the euro area cannot be the entire reason. The uncertainty regarding the referendum is expected to be the main reason, and hence the manufacturing PMI is likely to remain subdued in May, said Societe Generale in a research report. But, the CBI Industrial Trends survey was stronger in early May that indicates a slight recovery in the PMI to 49.7, added Societe Generale.

The uncertainty regarding referendum is expected to also adversely impact services. UK’s services PMI is likely to improve just moderately to 52.7 in May after falling to 52.3 in April. Meanwhile, the construction PMI is likely to remain at 52 after it dropped sharply in April. However, the housing construction is likely to weaken again. Overall, the PMIs are expected to affirm the market view that the UK Q2 GDP growth will be more subdued that the Q1 growth, noted Societe Generale.