Sterling Tumbles As UK Double Dip Comes Back With A Vengeance After PMI Misse, Comes Lowest In 7 Months

Tyler Durden's picture

After a few less than negative pieces of economic data out of the UK came out recently leading some to believe that the UK appreciation is a safe bet in advance of what seems an imminent BOE hike, today all the GBP bulls got another cold dose of reality after the PMI came at 7 month lows. From Reuters: "Manufacturing
activity grew more weakly than expected in April, at its slowest pace in
7 months, and a sharp slowdown in new orders cast a cloud over a sector
that has been a rare bright spot in the UK economy.
The Markit/CIPS manufacturing PMI headline index,
published on Tuesday, fell to 54.6 in April, its lowest since
September, from a downwardly revised 56.7 in the previous month and well
below the 56.9 consensus forecast in a Reuters poll on Friday." So to update: Japan slashes growth forecasts, Europe is overheating and due for a major monetary tightening, China already is (although the PBoC it pushed the parity to just above 6.50 last night so as not to seem too desperate), and the UK is in shambles. And somehow reverse decoupling is still expected to work? Judging by the now traditional futures levitation each and every morning the answer is a resounding yes.

More analyst comments from Reuters:


"The manufacturing sector has experienced an unexpectedly strong first quarter, which saw a spike in restocking, cementing the fact the industry is 'back in business'. Despite a fall in the April PMI figures, the manufacturing recovery remains on track with the figures showing growth for the past 21 months.

"The headwind now facing manufacturers, as we enter the new tax year, will be the fiscal changes impacting household spending and the prospect of impending interest rate hikes. What manufacturers now need is a steady and sustainable recovery and that certainly remains evident within our client base."


"The UK manufacturing purchasing managers' index for April has shown a fairly chunky slowdown in growth.

"It appears that new domestic orders have dropped substantially, which is worrying for future production and also employment prospects.

"There was a dip in the output prices component, but it is still the third-highest index reading sine the series began in 1999.

"Consequently, the issue of weak growth and high inflation will continue to trouble the BoE. Given they have a mandate of targeting 2 percent inflation in two years' time the worrying outlook for growth favours patience from BoE policymakers.

"As such, today's report further diminishes the likelihood of a rate hike this week, with November looking the most likely point for policy tightening at present."


"The results are disappointing, but it's unclear whether the drop in the index reflects a genuine slowdown in demand for manufactured goods or whether it reflects a degree of supply disruption arising from the tsunami in Japan in March.

"Whilst that's unclear, it does add further grist to the mill to the argument to keep interest rates on hold.

"For now, even at 54.6 the level of the PMI continues to indicate healthy expansion in manufacturing output."


"Although the decline in the headline index is significant it is not overly concerning. Manufacturing growth appears to be moderating back to more 'normal' levels, and the modest increase in new orders supports this."

"The weak manufacturing growth in March, combined with this early indication of activity at the start of Q2 suggests manufacturing will make a smaller contribution to GDP growth than in the past few quarters."

"The good news from the survey is that employment in the manufacturing sector is still rising, and that inflationary pressures seem to be waning. This adds to the almost foregone conclusion that the Bank of England will not hike interest rates when it meets later this week."


"On the face of it the figures look pretty disappointing. The manufacturing recovery is coming off the boil a bit and that was the one part of the economy that was growing. At the margin this gives another reason for the MPC to hold fire on interest rates. We don't think rates will rise until 2013."


"The manufacturing growth spurt looks to be fading rapidly.

"Although output growth was still expanding at an above long-term average clip, and solid job creation continued, the sector cooled further in April from the near record pace of expansion seen at the turn of the year.

"The outlook has deteriorated sharply, with new orders growth having collapsed from a booming pace at the start of the year to only register a weak influx of new business in April.

"Manufacturers reported that the domestic market has weakened considerably in recent months, with consumer demand in particular shifting into reverse gear. The sector appears to now be completely reliant on export orders to sustain growth.

"On the prices front, there was welcome news from a further easing in the rate of increase in input costs from January's record peak.

"This adds weight to the Bank of England's view that inflationary pressures are transitory and suggests that policymakers will continue to hold fire on the interest rate trigger."

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PaperBear's picture

Should the BoE srcub the rate hike and embrace the horror of another round of QE ?

Harlequin001's picture


but was there ever any doubt?

Kingbingo's picture

I'm trying to work out if I should buy a house. On one hand rates are artifically low and could cause a correction in prices when raised. On the other hand if its inflation all the way and supress rates at all costs I may as well load up on debt and let it erode.  

Harlequin001's picture

Ooh, love that flag...

The instant you buy a house you become a target for the tax man.

Kingbingo's picture

I'm on PAYE, I shop and I drive, I'm already on the hit list. 


What I really want is debt to ride inflation, no better way to get lots of it than a mortgague. But if I could borrow £400k and put it into gold I would do that instead. 

Harlequin001's picture

I believe that if you take your deposit and invest it in gold, when all is said and done you may be able to buy a number of houses after the event...

We're all on the hit list, it's just that some are more on it than others...

Just a thought...

Cursive's picture

From the quotes of the analysts, denial is definitely not just a river in Egypt.  That's corny, but it underscores the shallow analysis and pollyanna outlook of these idiots.

john milton's picture
Please respect's ts&cs and copyright policy which allow you to: share links; copy content for personal use; & redistribute limited extracts. Email to buy additional rights or use this link to reference the article - New Bundesbank chief takes helm

By Ralph Atkins in Frankfurt

Published: May 2 2011 19:34 | Last updated: May 2 2011 19:34

Germany’s new central bank president has taken office calling for a return to “normal” monetary policy in the eurozone – a clear hint he would back further rises in European Central Bank interest rates.

Harlequin001's picture

and collpase the whole charade in one fast easy go...

topcallingtroll's picture

So the south is to be expelled from the eurozone i take it?

Harlequin001's picture

and so ultimately is the north, west and east...

AUD's picture

Yet gold is up only a few Pounds & silver is down a Pound.

Looks like the 'Old Lady of Threadneedle St' still turns a few heads.

Harlequin001's picture

and more than a few dodgy deals to boot!

Josephine29's picture

Also news came out this morning about a speech from the Governor of the Bank of England which seemed to set UK monetary policy for a while and gave away his real objective! This of course is not inflation.

In an answer to a question Governor King went on to tell us two things. Firstly that those who suspect that UK monetary policy has been set for the benefit for the housing market rather than the level of inflation have been onto something. And secondly the chances of him voting for a rise in interest-rates this week are zero.

The economic consequences of high-level indebtedness now would become more severe if rates were to rise…………It is the main reason why interest rates are so low.

For those thinking he may change his mind in the near-term we also got this.

The problem of leverage, the sheer volume of debt in the economy, is still very large and this poses massive macro- economic challenges……..I think these macro-economic challenges will last many years.


Harlequin001's picture

so, no different to the US then...

TIMMAYYY's picture

hahahaha....bring this fucking house down.

I will dance in the flames!

Life is boring. Karma police are knocking on the door.


lets end this police state...

topcallingtroll's picture

And we will follow the UK and become a yob factory too, if we dont get our house in order. If there is one thing the brits are good at it is overproduction of yobs.

We must avoid confiscatory tax rates on earned income.

We must avoid lifetime open ended unemployment and welfare benefits.

writingsonthewall's picture

Clueless - you're totally clueless.


Maybe you need to look at the 44 MILLION Americans on food stamps and see what the consequences are of low taxes for the rich and ending unemployment benefit.

Also look at the crime rates - you'll find America is rather more criminal minded - you see all those unemployed without benefits have to live somehow - if that somehow is robbing little pipsqueks like yourself then so be it.


I laugh at those who call for an end to benefits - they will be the first to complain about the added cost of having a personal security guard to avoid regular robbery.

...and don't be so stupid as to think the police will sort it out - you cut taxes remember - they all left the job due to shite wages.....oh and what's left is....well what's left!


You dumbass capitalists - living in bubbles all the time. Thinking that unemployment benefits are for the benefit of the recipient....not the payer of taxes.


Had you read history you would know that the Victorians tired the same thing - it all ended badly I'm afraid - you see even children will resort to crime if they are hungry enough and tired of risking their lives cleaning chimneys for half a loaf of bread a day.

Bicycle Repairman's picture

I agree that the benefits must be granted, but the level of the benefits must not approach the living standard of the "productive".  In exchange for the benefits some form of daily, non-anti-social activity must be performed by the recipients.  In addition the recipients must be constantly "educated".  Activities and education TBD.

topcallingtroll's picture

An exception is to be made for boomers of course

topcallingtroll's picture

Most rich people income is not "earned income" but return on capital. I am suggesting we avoid high tax rates on earned income so that incentives for work are maintained.

The USA did fine before federal income taxes and transfer payments. In fact it was post ww2 labour governments in the UK who started throwing out the baby with the bathwater. Some aspects of victorian england helped turn the UK into an economic powerhouse.

It is typical to threaten society that if we dont hand over protection money to the ruffians in the form of idleness grants that they will try to injure us.

Bring it. Most of us are well armed. Some of us are well trained.

Harlequin001's picture

Historically the solution has always been to march a hungry mob across an international border where they either get shot or they get fed. Either way the problem has always resolved itself. Now the hungry masses just multiply threatening hell and damnation if we don't pay them but fear not, a solution will present itself soon, I'm sure...

Lord Peter Pipsqueak's picture

Looks like the government will have to import a few million more illegal immigrants to give us the "economic boost" Labour said justified their open doors immigration policy.

Because obviously an immigrant with no qualifications,trade or skills with a wife and five or six kids that will need housing and full welfare and health and ultimately pension benefits is going to pay an awful lot of taxes in the unlikely event of him getting a minimum wage job isn't he?

Wonder what the excuse will be next time the figures disappoint?The Royal wedding and Easter bank holiday caused a drop in demand?

Bicycle Repairman's picture

The UK is totally f#cked.  Don't discuss the issues, pack up and leave immediately.

falak pema's picture

r u inviting the Brits to join you in that safe haven called the US of hocked A

AldoHux_IV's picture

Goes to show stimulus and austerity don't work. All policymakers care about is how to extend the slavery of debt and keep the markets happy-- bullocks to everything else.

writingsonthewall's picture

Monetarism can only stem the collapse - it cannot aid recovery.

There is no stimulus in the UK, that all ended when the Government changed this time last year - now there is just have austerity and easy monetary policy.

This is not an example of stimulus failing the economy - if you look carefully the economy was GROWING but the new Governent took it all away and now the UK is STAGNATING.

However - the facts are that neither will work. There are no 'simple solutions' to a crisis of capitalism - it's about time sheepeople stopped expecting one to come along...


...but some people will believe any con - if it seems like a simple solution to all their problems....

topcallingtroll's picture

This is not a crises inherent to free markets and capitalism.

This is a crisis of corruption of free markets and capitalism with moral hazard, crony capitalism, entrenched oligopolies protected by regulation, and productivity killing incentives.

falak pema's picture


Don't argue with the Oligarch's version of truth!

Diplodicus Rex's picture


In studying the financial system from a laymans point of view (the reason why ZH is such a boon) it strikes me that I come across the same dilemma time and time again. The dilemma is to figure out whether you are trolling or you think that the maths behind your view stack up. It is exactly the smae dilemma when listening to Gordon Brown announce that he's abolished Boom and Bust. Either he totally understood the mathematical model behind his comments and, as a politician, he was simply lying, or, he had no idea of the maths behind his statement and as such was blissfully ignorant of his financial illiteracy.

Here's one of many links to disprove your "stimulus" theory.

Although from a US perspective, Denninger, does some of the best analysis on this. Your "stimulus" is nothing other than borrowing from the future to finance a 'temporary' fall in GDP with a view that the 'temporary' fall won't last long and that once we're back on our feet we can pay back both the principal and the interest. The problem with that is two-fold. The temporary nature never actually exists ( and the repayment of P+I in future requires us to be running a much higher GDP with the spare capacity to pay it back. It never happens.

Socialists' plans always fail when they run out of other peoples money. Not content in taking the current generation's money they take it from the generation to come and the one(s) after that. All in the name of 'social justice.


obelisks's picture

never mind.........when things get really bad the poor bastards can always

look at the Royal Wedding photo's

Global Hunter's picture

Hey there was a wedding on Friday if you didn't notice pay attention to what matters!

Lord Peter Pipsqueak's picture

The UK should be taught and shown as how not to run an economy to all Economic students.By abandoning its manufacturing industry for political reasons in the eighties and placing all its chips on the FIRE economy,it has now created a Frankenstein monster of a housing market that cannot even be allowed to correct in value,let alone crash.

Interest rates will be kept at zero until people can again flip houses at a profit,regardless of the disastrous consequences for sterling,the two headed monster the politicians must always please -the banking sector that made the loans to finance the properties and the electorate who judge the health of both themselves and the UK economy by the housing market, will not tolerate any party that does not deliver house price inflation.

In fact so corrupt has the political process become,that there is now almost a tacit agreement between the electorate and the government that house prices must always go up in price,and yet these people are the very first to complain about the never ending deluge of illegal immigrants,whose dual purpose is to keep a downward pressure on wages and to create an artificial demand for housing that the electorate have requested! 


Harlequin001's picture

Hmm, not sure that the UK is any different to any other credit based economy in this regard...

Boston Matrix's picture

Hmmm. not sure who the GBP bulls are, or what causes them to be so upbeat. UK Q1 retail figures were reported as being dire a fortnight ago; a sign of how tight people's cashflow is. Rates most likely on hold until November, as reported a couple of weeks ago: Rate-riser Andrew Sentance leaves BoE this month too, which should cool their boots somewhat.

Lord Peter Pipsqueak's picture

""The economic consequences of high-level indebtedness now would become more severe if rates were to rise,” Mr King said. “It is the main reason why interest rates are so low.”Mervyn King.

Translated into English:People have borrowed so much money they cannot afford to pay it back if we put up interest rates.

Consequences:Those who have been prudent and refused to overborrow and indulge in the disgusting greed and avarice of the property bubble and instead saved their money will now see it turned to worthless paper by the inflation Mervyn King says he is powerless to prevent.He could and should put up interest rates to protect the national currency and the savings and pensions of those trying to exist on fixed incomes.But he wo't because his first obligation is to the banks and then the government who will do everything it can to prevent house prices from falling.

.But the only lessons learned are that only mugs save and if you borrow too much the financial system protects you at the expense of everyone else.

Lord Peter Pipsqueak's picture

Andrew Sentance,one of the few arguing for a rate rise at the Bank of England rate setting committe has been replaced by Ben Broadbent ex Goldman Sachs:

"Mr Sentance has been calling for a rate rise since June 2010 and is expected to demand an increase from 0.5pc to 1pc on Thursday. Despite members Martin Weale and Spencer Dale, the Bank of England’s chief economist, sharing his view in recent months, the nine-strong committee is expected to keep rates on hold

Mr Sentance’s replacement on the Committee will be former Goldman Sachs’ chief economist Ben Broadbent."

amanfromMars's picture

Shame to see Barclays Corporate Banking such plonkers in the field. [Mark Lee's spiel being so much errant nonsense] Taking thirty pieces of silver to talk up a crap market is never a good sign for any business. In fact, it is usually a sure sign of abiding major systemic problems in that business which threaten to expose a right dodgy operation to meltdown and collapse.

blackbaron's picture

Any UK based readers care to recommend a source of news and info of a similar quality to ZH, but with a UK focus? if such a site exists...

MiniCooper's picture

The only part of the UK that had any sort of recovery in the last 2 years was London and only due to the torrent of Bank of England and tax payer cash flowing into City of London financial markets through the rescued banking system.

Everywhere else in the UK real economy was and is still on a downward trajectory. The small provincial town I live in about 20% of the shops on the high street are closed.

As a result, it is clear that the Bank of England are not going to raise rates any time soon and the austerity measures promised by the Coalition Governement are being scaled back or delayed. The real economy is too fragile even as the FTSE 100 soars.

Like the USA, the inflation rate in the UK is well above Bank of England 2%target but as is being reported today - Mervyn King warned that a rise in long-term interest rates would have “severe” consequences.

QE hasn't worked in the UK any better than the US. Stagflation anyone?

FunkyOldGeezer's picture

All the central bankers have to inflate to get out of the doggy doo. There's simply no other way except total default. Better to default by degrees and hope the people ultimately holding the debt, (the taxpayers), don't notice.

We've had stagflation for many years now. It started when the minimum wage came in and (a) artificially kept wages low and (b) gave business every excuse not to pay a decent livng wage to an ever increasing number of their employees, "ah, but the job pays minimum wage".  

Benefits aren't necessarily too high, wages for a great many are simply too low!

I never thought I'd see a Conservative led government cut police funding, nor alone so dramatically, but it's happening. In other words we're f**ked and we don't really care.

amanfromMars's picture

"I agree that the benefits must be granted, but the level of the benefits must not approach the living standard of the "productive".  In exchange for the benefits some form of daily, non-anti-social activity must be performed by the recipients.  In addition the recipients must be constantly "educated".  Activities and education TBD." Bicycle Repairman on Tue, 05/03/2011 - 08:06

Are money markets "productive" or Ponzi growth areas which are creating nothing but crippling debt and paying fools in the field, a fortune in invented money which has no value behind it.

It's a nice trick to load up the store/banks with new funds after the system was raided before and left bare, but the wealth supplied is not the peoples' nor the nations' debt, it is the bankers liability to repay, and as they make nothing for sale other than their scams,  is it a game and a gain which there is no point in playing, for it very quickly ends in the masses realising their suffering is artificially created by the money managers, and the riches which they hold are really stolen property .... your stolen property.