UK Manufacturing Growth Slows As Weaker Pound Drives Up Costs
December 01 2016 - 3:53AM
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British manufacturing sector expanded for the fourth straight
month in November, but the pace of growth slowed unexpectedly, as a
weaker currency drove up prices.
The Markit/CIPS Purchasing Managers' Index, or PMI, fell to 53.4
from 54.2 in October and September's 27-month high, survey results
from IHS Markit showed Thursday. A reading above 50 suggests growth
in the sector. Economists had forecast a higher score of 54.4.
"Although the recent growth spurt showed further signs of
slowing, the pace of expansion is still solid and above its
long-term trend," IHS Markit economist Rob Dobson said.
"This should be sufficient to ensure manufacturing is a positive
contributor to fourth quarter GDP."
Solid expansions of production and incoming new orders continued
in November with companies reporting that domestic and export
demand both remained positive growth spurs. So did new product
launches, sales initiatives and efforts to clear backlogs of work,
the survey said.
The weak sterling exchange rate boosted export competitiveness,
attracting more business from abroad, mainly the USA, mainland
Europe and the Middle East.
Meanwhile, the weaker currency negatively impacted costs,
driving average purchase prices at a pace close to October's near
six-year record and again at one of the fastest rates in the survey
history.
The survey showed that 84 percent made some reference to the
weak exchange rate versus 90 percent in October, while offering
reasons for the increase in costs.
As businesses passed on the increase in input costs to clients
in the form of higher selling prices, output charges rose for the
seventh successive month, with the rate of increase close to
October's 64-month record.
"The concern is that higher costs may in time offset any
positive effect of the weaker exchange rate, especially given that
export order book growth has already waned markedly from
September's five-and-a-half year high," Dobson said.
Manufacturing employment increased for the fourth straight
month, albeit slower than in October with mid-size firms reporting
the sharpest jobs growth.
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