Factories get export boost from Brexitstung pound
● Latest snapshot shows solid growth in output in July ● But economists warn of continuing cost pressures
Britain’s factories enjoyed a welcome bounce-back last month thanks to the strongest surge in export orders for more than seven years.
The closely watched Markit/ Cips UK manufacturing purchasing managers’ index (PMI) showed a reading of 55.1 last month, up from 54.2 in June and higher than expected. A reading above 50 indicates growth.
The pound rose against the dollar in the wake of the report, which noted that foreign demand for UK manufacturing output rose at the fastest pace since April 2010.
It was also the secondstrongest rate in the history of the survey as the Brexit-hit pound has boosted overseas demand for British-made goods and services.
The reading marked the first pick-up in growth for three months and offered some cheer for the wider economy.
Rob Dobson, director at report compiler IHS Markit, said the manufacturing sector had kicked off the third quarter on a “solid footing”.
He said: “Although the exchange rate remains a key driver of export growth, manufacturers also benefited from stronger economic growth in key markets in the euro area, North America and Asiapacific regions.
“Continued expansion is also still filtering through to the labour market, with the latest round of manufacturing job creation among the best seen over the past three years.”
The report also said pricing pressures eased further for manufacturers, with input prices rising at their weakest pace in over a year.
This gives hope that soaring UK inflation may begin to wane, relieving pressure on cash-strapped consumers.
It comes ahead of the Bank of England’s interest rates decision tomorrow, with speculation mounting over whether policymakers will vote for a rise to offset surging inflation.
Alan Maudsley, head of corporate development for Barclays in Scotland, said: “Manufacturers continue to grind out positive results helped by a recovering global economy and a weaker pound, allowing the industry to post the strongest rate of export growth for more than seven years.
“However, despite a slight easing on the cost side in July, cost challenges are still circling and margins remain under pressure.”
He added: “Higher prices may take their toll on domestic demand which has been fuelling growth in the first half of the year, so the timing of this return to strong export growth could not be better.” Bakery chain Greggs has bolstered sales despite seeing profits take a hit from costs linked to restructuring the business. The firm yesterday said like-for-like sales rose 3.4 per cent in the first half of this year, thanks to a strong customer appetite for salads and breakfast food. However, pre-tax profits dropped 24 per cent to £19.4 million. Chief executive Roger Whiteside, pictured, said: “The business has traded in line with our plans during the first half of the year.”