United Kingdom manufacturing defies expectations to hit four-month high

by Jared Lewis September 2, 2017, 0:50
United Kingdom manufacturing defies expectations to hit four-month high

The Nikkei India Manufacturing Purchasing Managers' Index (PMI) rebounded to 51.2 in August from a low of 47.9 in the previous month, indicating a substantial turnaround from July's contraction amid confusion over the new GST (Goods and Services Tax) regime.

That's up from 51.1, and it moves further above the boom-or-bust line of 50 that separates expansion from contraction. Demand from overseas also lagged, with new export orders slipping to 50.9 from 52.7.

Individually, new business surged at the quickest pace in more than three years, riding a wave of foreign demand.

Order books grew at the fastest pace in three months, partly driven by the strongest order inflow from overseas since April 2016. Readings above the 50 threshold indicate improving business conditions for manufacturers.

Italian manufacturing activity grew in August at its fastest rate for six-and-a-half years, a survey showed on Friday, bolstering prospects for near-term economic growth. Employment and supplier deliveries expanded at a slower pace in August than in July. This was highlighted by the sharpest increase in export sales since March 2010.

Samuel Tombs, chief United Kingdom economist at Pantheon Macroeconomics, said: "The pick up in the PMI brings tentative hope that the recent decline in the official manufacturing output data will be reversed swiftly".

Rob Dobson, a director at IHS Markit, which compiles the survey, said: "At the moment, the survey data suggest that the manufacturing economy remains in good health despite Brexit uncertainty, and should help support ongoing growth in the economy in the third quarter".

The latest official data showed retail inflation rose 2.36 percent in July on an annual basis after easing for three consecutive months.

Sterling - which is around 13% lower than its pre-referendum level against the dollar - has been a key driver of the resurgence in the United Kingdom manufacturing sector since last June, and that remained the case in August, IHS Markit said.

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