No gain from weak ster­ling for the UK

Ex­port fig­ures dis­ap­point

The Star Early Edition - - INTERNATIONAL - Jonathan Ca­ble and Ni­chola Sam­i­nather

BRI­TISH fac­to­ries were left out of a de­mand-driven surge in ac­tiv­ity across much of Asia and Europe in June, as weak­ness in ster­ling failed to trans­late into ex­port growth, sur­veys showed.

Fac­to­ries in the euro zone rounded off the first half of 2017 by ramp­ing up at the fastest rate for over six years while Asia’s tech-man­u­fac­tur­ing economies were helped by grow­ing global de­mand for elec­tron­ics prod­ucts.

But Bri­tish man­u­fac­tur­ing grew more slowly than any­one polled ex­pected as con­sumers faced the dou­ble-hit of ac­cel­er­at­ing in­fla­tion – caused in large part by the fall in the pound since last year’s vote to leave the EU – and slow­ing wage growth.

Yes­ter­day’s sur­vey sug­gested that the sup­posed sil­ver lin­ing of a weak­ened pound – more com­pet­i­tive ex­ports – is prov­ing elu­sive and could make the Bank of Eng­land (BoE) of­fi­cials think twice about rais­ing in­ter­est rates.

The Markit/CIPS UK Man­u­fac­tur­ing Pur­chas­ing Man­agers’ In­dex (PMI) fell to 54.3 points from a down­wardly-re­vised 56.3 points in May, a three-month low and be­low all fore­casts in a poll of econ­o­mists that pointed to a read­ing of 56.5 points. A read­ing above 50 in­di­cates growth.

“The de­cline in the PMI in June ro­bustly chal­lenges hopes that man­u­fac­tur­ing and ex­ports will pick up and off­set the con­sumer spend­ing slow­down. To­day’s (Mon­day’s) man­u­fac­tur­ing re­port weak­ens the case for rais­ing in­ter­est rates soon,” said Sa­muel Tombs at Pan­theon Macroe­co­nomics.

June’s man­u­fac­tur­ing PMI for the euro zone rose to 57.4 points, its high­est since April 2011 and up from May’s 57 points.

Sug­gest­ing the bloc’s mo­men­tum will con­tinue into the sec­ond half, new or­ders rose at the fastest rate since early 2011, back­logs of work in­creased at the fastest pace in more than 13 years, raw ma­te­ri­als were de­pleted and fac­to­ries in­creased head count at a near-record pace.

The up­turn came along­side fac­to­ries in­creas­ing prices, as they have done for nine months, wel­come news for pol­icy mak­ers at the Euro­pean Cen­tral Bank (ECB) who have been bat­tling for years to get in­fla­tion back to their 2 per­cent tar­get ceil­ing.

In­fla­tion was a stronger-than-ex­pected 1.3 per­cent in June, of­fi­cial flash data showed on Fri­day, and while still be­low tar­get, re­cent strong eco­nomic data meant ECB chief Mario Draghi last week raised the prospect of pol­icy tight­en­ing.

In Bri­tain, cen­tral bankers have started to sig­nal that a first rate hike in a decade might be ap­proach­ing to help curb the sharp rise in in­fla­tion.

BoE Gover­nor Mark Car­ney says he is watch­ing to see how the econ­omy copes with the launch of Brexit talks and whether weak­ness among con­sumers could be off­set by in­vest­ment and ex­ports.

Asia ac­cel­er­a­tion

Pri­vate sec­tor sur­veys of man­u­fac­tur­ers in Asia showed fac­to­ries in China, South Korea, Ja­pan and Tai­wan picked up in June, driven largely by a re­cov­ery in ex­ports.

But continued de­clines in en­ergy prices, which weighed on man­u­fac­tur­ing in In­done­sia and Malaysia, could hurt these two economies, while in In­dia, slug­gish do­mes­tic de­mand off­set strong for­eign de­mand and led to a slow­down.

Fac­tory PMIs for South Korea, Ja­pan, Tai­wan, Viet­nam and In­dia all re­mained above 50 points.

And all of them, ex­cept for Ja­pan and In­dia, rose from May.

“But the abil­ity for man­u­fac­tur­ers to con­tinue to ac­cel­er­ate, or to main­tain sharp surges in pro­duc­tion, is in ques­tion, given that the un­der­ly­ing de­mand, apart from some bright spots, doesn’t seem to have per­me­ated more widely across the dif­fer­ent sec­tors,” said Vishnu Varathan at Mizuho Bank.

While man­u­fac­tur­ing ex­panded at the fastest pace in three months in June in China, busi­ness con­fi­dence slumped to its low­est level this year amid a gov­ern­ment crack­down on debt risks and tight­en­ing fi­nan­cial con­di­tions.

“We be­lieve cycli­cal mo­men­tum (in China) has likely peaked and will ease fur­ther due to tighter fi­nan­cial con­di­tions,” Yin Zhang and He­len Qiao at Mer­rill Lynch wrote.

In Ja­pan, con­fi­dence among big man­u­fac­tur­ers hit its high­est level in more than three years in June, ac­cord­ing to a sur­vey from the cen­tral bank pub­lished yes­ter­day. – Reuters

PHOTO: EPA

An assem­bly line of An­tMiner S9 min­ing ma­chine at Bit­main’s man­u­fac­tur­ing base in Shen­zhen, China. Busi­ness con­fi­dence in the coun­try slumped to its low­est level this year amid a gov­ern­ment crack­down on debt risks and tight­en­ing fi­nan­cial con­di­tions.

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