PMI data reinforces tale of three economies

Good, bad, worse in the US, UK and EU.

Today's Markit PMIs (standard reminder: purchasing managers at companies surveyed, aggregated into an index showing activity across the economy, normalised so that 50=no change) highlight the discrepancy between the Eurozone economy (still contracting, albeit less each month than it has been for the better part of a year) and the US economy (which is growing, and growing faster most months).

(Today's releases are the "flash" PMIs, compiled from the first 85 per cent or so of managers to respond; they are thus to be taken with a larger pinch of salt than normal)

The Eurozone composite PMI – covering services and manufacturing – rose slightly to 47.3. This is a nine-month high, but still represents moderate contraction of GDP:

 

Even worse is the manufacturing data. Again a nine-month high, it now stands at 46.3, and rose by just 0.1 from November.

Compare that figure with the US, where the manufacturing PMI showed a sharp increase to 54.2, signifying healthy expansion:

As ever, the UK data lies somewhere between the two:

The UK is undergoing a renewed bout of economic weakness as it heads towards the end of 2012. The all-sector Output Index from the three PMI surveys rose from 49.7 in October to 50.2 in November, edging above the 50.0 no change mark. However, despite the increase, the latest reading was the third-weakest since April 2009 and consistent with the economy sliding back into contraction after the temporary growth surge seen in the third quarter.

The UK data also highlights the folly of relying too much on the PMI information to predict economic performance, though. All through the double-dip recession, commentators were insisting, based on the strength of PMI data, that the ONS was mistaken. And even as it fell to new lows, the ONS recorded the massive growth of last quarter.

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Why Chris Grayling is Jeremy Corbyn's secret weapon

The housing crisis is Labour's best asset - and Chris Grayling is making it worse. 

It feels like the classic Conservative story: wait until the election is over, then cancel spending in areas that have the temerity to vote Labour. The electrification of rail routes from Cardiff to Swansea – scrapped. So too is the electrification of the Leeds to Manchester route – and of the Midland main line.

But Crossrail 2, which runs from north to south across London and deep into the capital's outer satellites, including that of Transport Secretary Chris Grayling, will go ahead as planned.

It would be grim but effective politics if the Conservatives were pouring money into the seats they won or lost narrowly. There are 25 seats that the Conservatives can take with a swing of 1 per cent from Labour to Tory, and 30 seats that they would lose with a swing of 1 per cent from Tory to Labour.

It wouldn’t be at all surprising if the Conservatives were making spending decisions with an eye on what you might call the frontline 55. But what they’re actually doing is taking money away from north-west marginal constituencies – and lavishing cash on increasingly Labour London. In doing that, they’re actually making their electoral headache worse.

How so? As I’ve written before, the biggest problem for the Conservatives in the long term is simply that not enough people are getting on the housing ladder. That is hurting them in two ways. The first is straightforward: economically-driven voters are not turning blue when they turn 30 because they are not either on or about to mount the first rungs of the housing ladder. More than half of 30-year-olds were mortgage-payers in 1992, when John Major won an unexpected Conservative majority, while under a third were in 2017, when Theresa May unexpectedly lost hers.

But it is also hurting them because culturally-driven voters are getting on the housing ladder, but by moving out of areas where Labour’s socially-concerned core vote congregates in great numbers, and into formerly safe or at least marginal Conservative seats. That effect has reached what might be its final, and for the Conservatives, deadly form in Brighton. All three of the Brighton constituencies – Hove, Brighton Kemptown and Brighton Pavilion – were Conservative-held in 1992. Now none of them are. In Pavilion they are third, and the smallest majority they have to overcome is 9,868, in Kemptown. The same effect helped reduce Amber Rudd’s majority in Hastings, also in East Sussex, to 346.

The bad news for the Conservatives is that the constituencies of Crawley, Reading, Swindon and in the longer-term, Bracknell, all look like Brightons in the making: although only Reading East fell to Labour this time, all saw swings bigger than the national average and all are seeing increasing migration by culturally-driven left-wing voters away from safe Labour seats. All are seeing what you might call “Hackneyfication”: commuters moving from inner city seats but taking their politics with them.

Add to that forced migration from inner London to seats like Iain Duncan Smith’s in Chingford – once a Conservative fortress, now a razor-thin marginal – and even before you add in the appeal of Jeremy Corbyn’s person and platform, the electoral picture for the Conservatives looks bleak.

(It should go without saying that voters are driven by both economics and culture. The binary I’ve used here is simplistic but helpful to understand the growing demographic pressures on the Conservatives.)

There is actually a solution here for the Tories. It’s both to build more housing but also to rebalance the British economy, because the housing crisis in London and the south is driven by the jobs and connectivity crisis in the rest of the United Kingdom.

Or, instead, they could have a number of measures designed to make London’s economy stride still further ahead of the rest, serviced by 5 per cent mortgages and growing numbers of commuter rail services to facilitate a growing volume of consumers from London’s satellite towns, all of which only increase the electoral pressures on their party. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.