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Manufacturing Picks Up Unexpectedly In May

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Guest wrongmove

Not as bullish as it sounds from the title....

Manufacturing picks up unexpectedly in May

" LONDON (Reuters) - Manufacturing activity accelerated unexpectedly in May, with factory gate inflation picking up to equal a record high, a survey showed on Friday, reinforcing expectations interest rates will rise again soon.

The Chartered Institute of Purchasing and Supply/NTC purchasing managers' index rose to 54.9 last month from an upwardly revised 54.1 in April. Analysts polled by Reuters had expected a slight easing to 53.7.

A reading above 50.0 indicates expansion, while anything below marks a contraction.

The Bank (TBHS - news) of England is likely to be concerned to see the CIPS/NTC index measuring output price growth nudging higher to equal February's series high of 56.9.

"This is going to keep upward pressure on interest rate expectations, although we continue to favour a July move rather than a hike next week," said James Knightley, an economist at ING.

Policymakers, currently battling to get inflation back to its 2.0 percent target, have said they are on the lookout for any signs that manufacturers are ramping up prices to repair profit margins damaged in last year's energy price spike.

Inflation spiked above 3 percent in March to hit its highest rate since comparable records began a decade ago. While price growth has eased since then, strong factory gate inflation may drive prices on the high street skywards again.

Financial markets are pricing in the possibility that the central bank may have to raise interest rates to as high as 6 percent to combat price pressures, having already hiked rates four times since last August to 5.5 percent.

Markets, which took the hawkish data in their stride, have not ruled out the chance rates could rise when the BoE's Monetary Policy Committee meets again next week......"

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Guest wrongmove
aye, I'd say that was pretty freakin' misleading!

I wouldn't say it was misleading, but the article is still bearish on HPs as these figures are good news for the economy, but point to higher IRs.

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