The purchasing manager’s indices (PMI) provide a window through which we can gain some insight into manufacturing, services and construction activity. The readings for November are generally good with a number above 50 indicating expansion.

Manufacturing (58.2 and the highest level in over 4 years)

Support from growing new orders and production is boosting confidence and should lead to more investment in capacity. This will in turn stimulate job creation. We expect optimism to remain solid in coming months helped by a weaker pound spurring exports.

Services (53.8 v 55.6)

The rise in inflation has had a slight negative impact on consumer spending on services. Input costs for service providers have also increased. However, if inflationary pressures ease, confidence should pick up and spending at a higher level resume.

Construction (53.1 v 50.8)

Having been in the doldrums, UK construction activity is expected to improve. Survey respondents noted that house building projects underpin the rebound in confidence. In the survey, the outlook for civil engineering weakened but this sector should gain support from the government’s new industrial strategy which we wrote about last week. If targets for improving infrastructure are realised it will inject enthusiasm and provide a focus to help boost the country’s productivity.

Summary – Composite (54.9 v 55.8)

The overall PMI, which is a composite of all 3 measures, fell slightly due to the dominance of the service sector in the UK. Although service sector confidence receded, better readings from manufacturing and construction are encouraging. Levels of confidence across survey respondents are consistent with a positive economic outlook.

UK Composite Monthly PMI and Underlying Growth (Measured Quarter by Quarter)


An OECD (Organisation for Economic Co-operation and Development) report this week looking at retirees’ income levels should be a wake-up call for everyone. The conclusion is that those reliant on state provision will be poorly served in the years ahead. The UK is particularly hard hit when compared to other nations. This makes it all the more important for the UK to raise its game on the world stage.

The chart below, shown in the report, measures the replacement rate of average earnings paid out by way of mandatory pensions across a set of relatively rich nations. For the UK, their estimate is 29% of pre-retirement net earnings. The report does not provide the underlying data so to put this into context we looked at the average wage (excluding bonuses) in the UK.

According to the Office for National Statistics (ONS), the average net amount earned is £20,008 (after tax and other deductions). Therefore, a ratio of 29% implies a pension of £5,803. However, the average weekly state pension is £159.55 per week (£8296 pa) which implies a ratio of 41%. The calculation they use is based on adjusted numbers but whichever way you look at it the outcome is not great for retirees who have not made sufficient private provision.

Net Pension Replacement rates: Average Earner

Source: OECD, November 2017

The report goes on to highlight that even though the amount of public spending on pensions has grown since 2000, the rate is still well short of what is required for pensioners to maintain a comfortable level of income. Furthermore, the OECD expects the pace of spending growth to slow substantially. At the same time, UK citizens are now living longer meaning those wanting to ensure a reasonable pension may have to delay their retirement date or save more.

The OECD said that Britain’s relatively low state pension was to blame for high levels of pensioner poverty. They point out that the UK’s new, single-tier state pension, introduced in 2016, will have an impact, but only after many years. While younger British workers with private pensions should be able to make adequate provision for retirement, those relying on the state pension and about to retire without additional means of support may be left with few options to increase their level of income in retirement.

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