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Coffee House

A post-Brexit slump? Here’s the good news about Britain’s economy you didn’t hear

4 January 2017

4:05 PM

4 January 2017

4:05 PM

The rearguard Remain campaign is now living in a parallel universe. In the past 24 hours we have heard endless whining about Sir Ivan Rogers’ departure and how it will mean disaster for our trading relationship with the EU. We’ve had more claims that inflation is going to surge. The poor Christmas results put out by Next have been taken as a sign of a post-Brexit economic slump when they are really just part of a change in the patterns of retailing, with online sales growing at the expense of those in shops.

Meanwhile, come yet more genuine good news on the economy. Yesterday, the Markit/CIPS Purchasing Managers’ Index (PMI) for the manufacturing sector was published, showing a rise to 56.1 in December, from 53.6 in November. That is the best figure for 30 months and one of the best in 25 years. Anything greater than 50 signifies expansion and anything less than 50 contraction. The increase in output shouldn’t really come as a surprise, given that the fall in the pound has made UK exports more competitive, but of course all we have heard about from the Remain lobby are grim warnings that input prices, in the form of imported materials and components, have risen. The whole point of manufacturing is to add value to raw materials, so it ought to be obvious that the former effect is going to outweigh the latter.


Today, it has been followed by similar news in the construction sector – the PMI for which rose to 54.2 in December from 52.8 in November. The PMI, which in the case of the manufacturing sector takes data from 600 companies, is widely regarded as a good early indicator of economic health. True, ONS figures published a month ago showed a 0.9 per cent slump in manufacturing, but they were for October, and so are a good month behind the PMI.

Any more divergence between the PMI and ONS will certainly raise questions about methodology of both indices. But surely the publication of good PMI data ought to warrant some mention in the news. Yet there was none on this morning’s Today programme – which led on Sir Ivan Rogers and Next but found no room to report good economic news. It is becoming an all-too-common phenomenon. As I wrote here last week, the Today programme gave masses of coverage to a highly-dubious report from the IPPR, making highly speculative predictions about future economic risks caused by Brexit. And yet when some genuine economic data is published it can’t be bothered to report it. I look forward to an item on tomorrow morning’s show about the healthy rise in PMI for construction. Or maybe not.

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