The weaker-than-expected unchanged manufacturing output reading in May suggests the sector is not entirely immune to elevated oil prices, despite the structural tailwind from the AI buildout. Nevertheless, thanks to upward revisions to output in previous months, the 3m/3m annualised growth rate still stands at an impressive 4.7%, showing that the sector remains in a cyclical upswing. It could receive a further boost if the recently announced US-Iran peace deal leads to a lasting reopening of the Strait of Hormuz and, in turn, lower oil prices.
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