Market Watch: Monthly data will give better picture of economy

MONTHLY figures from the construction, manufacturing and services sectors will be scrutinised this week for evidence of how the UK economy performed at the start of the second quarter.

Last week's disappointing news of only a 0.5 per cent rise in gross domestic product (GDP) will have economists hoping for a better performance in April's purchasing managers' indices (PMIs).

The monthly data - compiled by the Chartered Institute of Purchasing and Supply - gives a snapshot of the UK's economic performance. Manufacturing and construction figures will be published on Tuesday and Wednesday before the key services sector numbers are released on Thursday. Services account for 70 per cent of UK output.

Howard Archer, chief UK and European economist at IHS Global Insight, expects the manufacturing PMI to fall from 57.1 in March to a six-month low of 56.5 in April, with any reading above 50 indicating growth in the sector.

Archer added: "Manufacturers have been benefiting from decent orders, the competitive level of the pound and an ongoing rebuilding of stocks after they had been slashed during the recession."

Following contradictory data in the most recent national account figures for the first quarter, Archer said there was "major uncertainty" over April's construction sector data, but he still expects the industry to have continued bouncing back from January's heavy snow.

Expansion in the services sector is expected to have eased back to 55.5 in April, after jumping to a 13-month high of 57.1 in March.

In corporate news, Wednes-day's interims from software group Sage will be watched for further indications of a sales revival under the leadership of new boss Guy Berruyer. Newcastle-based Sage returned to sales growth in the six months to September and maintained the improved performance in the final three months of 2010.

The FTSE-100 company has been benefiting as its target market - small and medium-sized businesses - begin to get back on track following the recession and financial crisis.

George O'Connor, analyst at Panmure Gordon, said improving conditions will have helped turnover rise by 2 per cent to 733.8 million in the half-year. He is forecasting underlying interim profits to edge up by 2 per cent to 185.3m, although this includes a near 1 per cent fall in the UK.

The UK makes up about 20 per cent of its sales, with the US accounting for about 40 per cent.

Among the Scottish stocks, "operating efficiencies" will come into focus with Aberdeen Asset Management's interim results, according to analyst Michael Sanderson at Evolution Securities.

Sanderson said: "We forecast closing funds under management (FUM) of 177.1 billion, broadly unchanged for the period. We believe that such stability in FUM demonstrates the strength of the Aberdeen investment franchise given the volatile environment for emerging market flows during the first half."

Evolution expects interim pre-tax profits to be up 38.8 per cent year-on-year at 128.6m, on the back of improving operating margins.