Forex

UK manufacturing PMI disappointment weighs on British pound

The UK manufacturing purchasing managers index (PMI) expanded again in September, but at a slower pace than August. The details of the survey disappointed and the British pound lost ground against the US dollar and the euro.

The headline rate of manufacturing PMI growth was 55.9 in September. While a number above the key 50 level indicates growth, the pace of expansion slowed from August’s 56.7. Sterling moved immediately lower following the data release.

A number of details weighed on the index. They include:

  • A slowdown in new orders.
  • Manufacturers reporting higher import costs for the materials required to manufacture their goods.
  • A slowdown in production growth rates.

“Although it looks as if the sector made solid progress through the third quarter as a whole, the growth slowdown in September is a further sign that momentum is being lost across the broader UK economy,” said Rob Dobson, a director at IHS Markit who compiles the survey.

“Manufacturing is also increasingly being buffeted by rising cost inflationary pressures,” Dobson added.

The one bright spot in the report was that export activity remained upbeat during September, as overseas purchasers continued to take advantage of the weaker British pound. Employment growth across the UK’s private manufacturing also help up strongly, the survey showed.

Elsewhere Monday, IHS Markit also published the final release of the euro zone manufacturing PMI. The survey showed the private manufacturing sector expanded at a rate of 58.1 in September. While that was an increase from August’s 57.4, it was a spot lower than the preliminary estimate of 58.2.

IHS Markit said the euro zone manufacturing upturn was generally broad-based with all eight of the euro-zone country surveys calculated by the data expert, recording expansion during September.

“The eurozone manufacturing boom kicked into an even higher gear in September, with the PMI rising to a level surpassed only once in the past 17 years,” said IHS Markit’s chief economist, Chris Williamson. “Greece is the latest good news story, enjoying its strongest growth since June 2008.”

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