British pound remains well bid following strong manufacturing PMI print

British pound remains well bid following strong manufacturing PMI print

The British pound is holding around the $1.35 level, following a stronger than expected manufacturing PMI result, as cable hits some resistance in the mid $1.35 area.

Data experts IHS Markit, reported the headline manufacturing PMI index hit a more than four-year high of 58.2 in November, up from October’s 56.6.

By 1200 BST, the British pound was trading at $1.3502. It was around the $1.3484 level at the UK market close, Thursday.

Broad-based uptick

The PMI survey showed the strong improvement was driven by manufacturing output, new orders and employment levels, which all grew at a faster pace than in October.

“UK manufacturing shifted up a gear in November, with growth of output, new orders and employment all gathering pace,” said Rob Dobson, an IHS Markit director.

“On its current course, manufacturing production is rising at a quarterly rate approaching 2%, providing a real boost to the pace of broader economic expansion,” Dobson added.

The survey results also showed signs of investment growth in the sector. Demand for UK investment goods, including plant and machinery, surged. New orders for investment goods hit levels not seen in over ten years.

“This suggests that capital spending, especially in the domestic market, is showing signs of renewed vigour,” Dobson said.

Inflation continues to bite

However, it wasn’t all positive. Manufacturers are still feeling the pressure of higher costs. The prices they pay for raw materials rose at a pace similar, but just below, October’s seven-month high.

Manufacturers continued to pass a proportion of their increased costs onto their customers. Output prices – the prices charged at the factory gates – rose at a seven-month high rate. It was also among the highest rises in the past six-and-a-half years.

“Companies linked the latest increase to stronger demand boosting their pricing power and the passthrough of rising costs to clients,” the survey stated.

However, looking forward, the survey noted business optimism remained upbeat. Respondents pointed to brighter sentiment regarding investment plans and improving market conditions.

By Ilona Billington
Ilona is a freelance writer and editor with over 15 years experience reporting and writing about UK and European economics, real estate, financial markets and central banks.

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