UK exporters continue to benefit from buoyant conditions in Euro zone
Continued marked expansion of UK export markets was recorded at the start of Q4 2006, according to recent research conducted by NTC Economics Ltd on behalf of Euler Hermes UK, part of Euler Hermes, a subsidiary of AGF and member of Allianz.
The Euler Hermes UK PMI Exporters’ Index registered a reading of 57.0 in October, improving on the eight-month low of 56.7 posted in September. At this level, the index points to a further strong gain in UK exports in October, with PMI data again suggesting that the Euro zone was the key source of growth.
The Euler Hermes UK PMI Exporters’ Index is derived from the monthly Purchasing Managers’ Index® (PMI®) surveys conducted by NTC Economics and other organisations around the world covering 9,000 companies in 21 countries. By weighting together the national PMI data according to the UK’s trade with each country, a reliable monthly indication of the health of UK export markets has been calculated. The index has tended to move in advance of changes in official data on actual UK export sales, thereby providing an advance indication of export performance.
Although remaining down on highs registered earlier in the year, the index continued to perform well in October, recording a reading of 57.0, up from a revised 56.7 in the previous month. Latest data continues to suggest marked expansion of UK export markets, in line with the trend seen throughout 2006 so far.
Since the start of the year, the index has averaged 57.8 and, if this average is maintained until the end of 2006, the index would suggest the UK’s best export performance in a calendar year since 2000 (when the index averaged 59.1).
“The continuation of strong economic performance in the Euro zone remains a key factor driving export growth,” explains James Daly, Commercial Director of Euler Hermes UK.
“The region, which is the destination for over half of all UK exports, has experienced a strong economic upturn during 2006 and, according to latest PMI data, continued to experience broad based robust expansion at the start of Q4. Above-trend growth in recent months has increasingly been supported by improving domestic demand in line with falling levels of unemployment and improved corporate and consumer sentiment.
“Meanwhile, there were tentative signs of stronger US economic expansion in October. The world’s largest economy has endured a housing-led slowdown in recent months, with growth just 1.6% annualized in Q3 – its lowest rate since the start of 2003. However, in a positive development for UK exporters, data from the ISM showed a marked rebound in its non-manufacturing index to 57.1 in October, from 52.9 in September. With energy pressures showing signs of subsiding, and unemployment at a five-and-a-half year low, the outlook for consumption in the US has brightened.”
Elsewhere, the Japanese economy continues to expand moderately, though growth has down shifted since earlier in the year and there have been signs of slower consumption in recent months. Still, the Japanese PMI remained above its long-term average in October to suggest that overall growth remains firm.
The profitability of UK companies was reported to have risen in Q3, albeit only marginally, dampened by rising raw material costs and price discounting. Providing the principal support to profits growth was overseas demand, which was reported by companies to have had the most positive influence on profits of all factors for the fourth successive quarter.