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U.K. PMIs - Definitely A Boris Bounce

Mar. 05, 2020 10:08 PM ETEWU, EWUS, FKU, HEWU, FLGB, ZGBR
Tim Worstall profile picture
Tim Worstall


  • Before the election and Brexit, I was insisting that the UK economy was fundamentally strong but held back by the joint uncertainties.
  • The implication of that was that once the election was decided - that in itself deciding the Brexit question - we would see a rebound in confidence and thus growth.
  • This is what the UK PMIs are showing, that the Boris Bounce is here. I am therefore confident - subject to the coronavirus of course - about future growth.

The essential case

I have been saying for most of the past year that the UK economy was fundamentally strong. Employment was high, unemployment low, no sign of inflation, really, no reason why we shouldn't be seeing substantial growth. Except, of course, we weren't.

The reason we weren't is that the economy faced uncertainty. As Keynes went to great lengths to point out, the business cycle is driven by the "animal spirits" of businessmen. Business investment being driven by those opinions, business investment being the section of GDP that varies the most over the business cycle and which drives that cycle.

One uncertainty was over Brexit - would it even happen, if it did under what sort of terms and so on. Then toward the end of the year - from the autumn, when it became obvious that there would need to be an election - there was that uncertainty over whether Jeremy Corbyn would become prime minister. Leave aside any political views about progressives and so on, his ascendance would not have been good for us investors, capitalists as we are.

The proof of the pudding for this contention is whether there has been a bounce since the uncertainty was resolved. Last month's figures show there was, at least in embryo. This month's PMIs show that the resurgence has legs.

We still have external events like that coronavirus to think about but internally to the UK economy, we're lookin' good.

What this means for us as investors is that the UK-oriented - which is different from the UK-listed - companies are buys.

UK Manufacturing PMI

The UK manufacturing PMI numbers show continued expansion:

The seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index® (PMI®) rose to 51.7 in February, up from 50.0 in January, but below the earlier flash estimate of 51.9. The PMI posted above the

This article was written by

Tim Worstall profile picture
Tim Worstall is a wholesaler of rare earth metals and one of the global experts in the metal scandium. He is also a Fellow at the Adam Smith Inst in London and an writer for a number of media outlets, including The Times (London), Telegraph, The Register and even, very occasionally indeed, for the WSJ. This account is linked with that of Mohamad Machine-Chian: https://seekingalpha.com/user/52914142/comments

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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