UK factories grow stronger than expected in August

Data suggests manufacturing remains in good health despite uncertainty surrounding Brexit

There are some signs of shortages of workers and material in UK manufacturing, but that has not impacted on the latest growth figures (Reuters)

UK factories grew a lot more strongly than expected in August as work flowed in from home and abroad, a survey showed on Friday, suggesting the economy might be picking up speed after a slow first half of 2017.

The Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) jumped to 56.9 from 55.3 in July, higher than any forecasts in a Reuters poll of economists.

Manufacturing accounts for only around 10 per cent of the UK economy. But Rob Dobson, a director at IHS Markit, said the strong performance last month, after a good July, should help support overall growth in the third quarter.

That could “add fuel to hawkish (Bank of England) policymakers’ calls for higher interest rates,” he said.

The BoE’s rate-setters voted 6-2 against a rate hike in August with most policymakers expressing concern about the impact of last year’s Brexit vote on the economy.

Mr Dobson said it looked likely that manufacturing would keep up its growth in the near term because the pick-up was being felt across the sector and among small and large firms alike.

While there were some signs of shortages of workers and material, “at the moment, the survey data suggest that the manufacturing economy remains in good health despite Brexit uncertainty,” he said.

However, there has been a marked discrepancy in recent months between the PMI readings of the manufacturing sector and official data which has painted a weaker picture.

IHS Markit said manufacturing output growth in August hit a seven-month high and new orders rose at the fastest pace in three months.

Growth in exports eased off only slightly from a seven-year high in July, helped by stronger demand from key markets in Europe, the United States and elsewhere and by the fall in the value of the pound since the Brexit vote.

Reuters