UK manufacturing growth slowed to a two and half year low in August, with the sector held back by sustained export weakness amid a strong pound and fears over China, a survey revealed today.
The UK manufacturing purchasing managers’ index (PMI) fell to 51.5 in the month, down from 51.9 in July. Any score above 50 indicates expansion.
This was “well below” the index average over the past two-and-a-half years, compiler Markit said.
After two years of continual job creation, August saw a reduction in headcount in the sector.
The company suggested the strong pound, weak sales to the Eurozone and the slowdown in China all had an effect.
“The UK manufacturing sector remains in a holding pattern, with production growth hovering around the stagnation mark and marginal job losses reported for the first time in 26 months,” said Rob Dobson, Markit’s senior economist.
“Export order volumes continue to disappoint, with the sterling exchange rate, weak sales growth to the eurozone and the slowdown in China all having an impact.
“Given that China makes up only a small proportion of UK exports, the direct impact of a slowing in that nation is likely to be minimal. However, it is too early to say what the indirect impact may be if there is any knock-on effect for broader global economic growth.”
On a brighter note, the survey found a “substantial drop” in input prices, which fell at “one of the steepest rates” seen in the past 16 years. This was down to lower oil and commodity prices, as well as the strong pound, which makes exports more expensive but imports cheaper.
The pound slipped immediately after the figures were announced, as markets bet that the weaker figures would push back the timing of any rate rise by the Bank of England.
Sterling fell half a cent against the dollar to $1.5339 and was down more than a cent against the euro at €1.3591.
German manufacturing activity hit a 16-month high in August, but French and Italian activity each reached four-month lows.
