Export boost for UK manufacturing

A worker inspects rolls of steelImage copyright

A surge in export orders helped to lift manufacturing activity last month, according to a closely-watched survey.

The Markit/CIPS UK manufacturing purchasing managers’ index rose to 55.1 in July, up from 54.2 the month before. A figure above 50 indicates expansion.

The survey found export orders rose last month at the fastest pace since April 2010, and at the second highest rate since the survey began.

Markit said the weaker pound remained a “key driver” of export growth.

The pound jumped to a 10-month high against the US dollar after the publication of the report.

Interest rates

The figures revealed the first pick-up in growth for three months.

Rob Dobson, a director at Markit, 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 Asia-Pacific 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 Bank of England will make its latest decision on Thursday on whether to raise interest rates.

Mr Dobson added: “If this trend of milder price pressures is also reflected in other areas of the UK economy, this should provide the Bank of England sufficient leeway to maintain its current supportive stance until the medium-term outlook for economic growth becomes less uncertain.”

Economists warned that the figures would not necessarily boost wider UK growth.

Samuel Tombs of Pantheon Macroeconomics said: “Markit’s survey remains consistent with only modest growth in manufacturing output that will provide insufficient compensation for the slowdown in the consumer sectors of the economy.”

James Smith, an economist at ING, added: “Wider economic data, from the weak second-quarter growth reading to the latest dip in consumer confidence, suggests that the economy is losing speed.

“For that reason, we think the Bank of England is unlikely to hike rates this year.”