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You can find the current article at its original source at https://www.theguardian.com/business/2017/oct/02/slowdown-uk-manufacturing-sector-weak-pound-pmi-brexit
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| Version 4 | Version 5 |
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| Slowdown in UK manufacturing as weak pound raises costs | Slowdown in UK manufacturing as weak pound raises costs |
| (about 1 month later) | |
| Britain’s manufacturers are showing signs of a slowdown in growth, as the boost to exporters from the weak pound is offset by rising production costs and fears over Brexit. | Britain’s manufacturers are showing signs of a slowdown in growth, as the boost to exporters from the weak pound is offset by rising production costs and fears over Brexit. |
| Sterling’s depreciation was widely expected to benefit manufacturers as their goods become more competitively priced for foreign buyers. However the cost of imported materials used in the production process has also risen, hitting a six-month high last month, according to a closely watched barometer of factory sentiment. | Sterling’s depreciation was widely expected to benefit manufacturers as their goods become more competitively priced for foreign buyers. However the cost of imported materials used in the production process has also risen, hitting a six-month high last month, according to a closely watched barometer of factory sentiment. |
| The Markit/Cips UK manufacturing PMI index showed activity fell to 55.9 last month from 56.7 in August, as firms were hit by the rising cost of commodities. There was also a shortage of some materials such as plastics and steel. | The Markit/Cips UK manufacturing PMI index showed activity fell to 55.9 last month from 56.7 in August, as firms were hit by the rising cost of commodities. There was also a shortage of some materials such as plastics and steel. |
| Although the reading was below City expectations, the figure is still above the 50 mark that separates expansion from contraction. But the survey of purchasing executives in more than 600 industrial companies points to weaker growth in the UK economy. | Although the reading was below City expectations, the figure is still above the 50 mark that separates expansion from contraction. But the survey of purchasing executives in more than 600 industrial companies points to weaker growth in the UK economy. |
| Rob Dobson, the director at IHS Markit, which compiles the survey, said: “Although it looks as if the sector made solid progress through the third quarter as a whole, the growth slowdown in September is a further sign that momentum is being lost across the broader UK economy.” | Rob Dobson, the director at IHS Markit, which compiles the survey, said: “Although it looks as if the sector made solid progress through the third quarter as a whole, the growth slowdown in September is a further sign that momentum is being lost across the broader UK economy.” |
| While the report showed gains in new orders to be slower than in the prior month, companies reported that demand remained solid in both domestic and overseas markets. But the rising cost of commodities, and the weak pound pushing up the price of other raw materials, damaged optimism in the industrial sector. | While the report showed gains in new orders to be slower than in the prior month, companies reported that demand remained solid in both domestic and overseas markets. But the rising cost of commodities, and the weak pound pushing up the price of other raw materials, damaged optimism in the industrial sector. |
| Scotiabank’s Alan Clarke said the figures were disappointing but far from a weak reading on the UK economy. “In the big scheme of things, this is reasonably in keeping with what we have seen over the past year,” he said. | Scotiabank’s Alan Clarke said the figures were disappointing but far from a weak reading on the UK economy. “In the big scheme of things, this is reasonably in keeping with what we have seen over the past year,” he said. |
| Similar to other increasingly globalised economies, the UK manufacturing sector has expanded its use of materials sourced overseas in recent years. While this can help reduce production costs, it exposes factories to risks arising from movements in sterling. Sterling remains 10% below its level before the Brexit vote. | Similar to other increasingly globalised economies, the UK manufacturing sector has expanded its use of materials sourced overseas in recent years. While this can help reduce production costs, it exposes factories to risks arising from movements in sterling. Sterling remains 10% below its level before the Brexit vote. |
| Official data on Friday showed the UK economy grew at a slower pace than first thought in July, putting Britain at the bottom of the G7 growth table just as the Bank of England looks ready to raise the cost of borrowing for the first time in a decade. | Official data on Friday showed the UK economy grew at a slower pace than first thought in July, putting Britain at the bottom of the G7 growth table just as the Bank of England looks ready to raise the cost of borrowing for the first time in a decade. |
| The weak reading from the manufacturing sector may discourage the Bank from hiking the cost of borrowing. Threadneedle Street will be looking at other data over the coming month before its monetary policy committee makes a decision on interest rates in November. | The weak reading from the manufacturing sector may discourage the Bank from hiking the cost of borrowing. Threadneedle Street will be looking at other data over the coming month before its monetary policy committee makes a decision on interest rates in November. |
| The state of the Brexit negotiations, where progress has been slow, has been putting businesses off investing in their UK operations. Recent readings on economic growth showed investment by companies to be flat in the second quarter. | The state of the Brexit negotiations, where progress has been slow, has been putting businesses off investing in their UK operations. Recent readings on economic growth showed investment by companies to be flat in the second quarter. |
| However, some are putting money into the UK economy, as the weak pound makes British products more competitive on the global market. The automotive supplier Brose, which employs about 1,000 people at two factories in Coventry, is opening a new £10m paint plant with the creation of about 30 new jobs. | However, some are putting money into the UK economy, as the weak pound makes British products more competitive on the global market. The automotive supplier Brose, which employs about 1,000 people at two factories in Coventry, is opening a new £10m paint plant with the creation of about 30 new jobs. |
| The German-owned company’s plant will be able to paint about 3.5m seats a year for UK customers, including those of Jaguar Land Rover, Nissan and Toyota. “Brose is committed to growing our UK operation,” said Juergen Zahl, the managing director of its UK arm. | The German-owned company’s plant will be able to paint about 3.5m seats a year for UK customers, including those of Jaguar Land Rover, Nissan and Toyota. “Brose is committed to growing our UK operation,” said Juergen Zahl, the managing director of its UK arm. |
| Philip Hammond, the chancellor, could use his forthcoming budget to boost business investment, according to Lee Hopley, the chief economist at EEF, the manufacturers’ organisation. “Government action in the forthcoming budget to spur companies to commit to investment in the UK will be a priority,” she said. | Philip Hammond, the chancellor, could use his forthcoming budget to boost business investment, according to Lee Hopley, the chief economist at EEF, the manufacturers’ organisation. “Government action in the forthcoming budget to spur companies to commit to investment in the UK will be a priority,” she said. |
| Meanwhile, the eurozone is leaping ahead. IHS Markit’s manufacturing PMI for the single currency bloc hit a record high for September, as conditions strengthened to the greatest extent in over six and a half years. The survey came in for 58.1 in the eurozone, slightly below expectations among economists. | Meanwhile, the eurozone is leaping ahead. IHS Markit’s manufacturing PMI for the single currency bloc hit a record high for September, as conditions strengthened to the greatest extent in over six and a half years. The survey came in for 58.1 in the eurozone, slightly below expectations among economists. |
| Samuel Tombs, the chief UK economist at the Pantheon Macroeconomics consultancy, said: “UK manufacturers are riding on the coat-tails of their counterparts in the booming eurozone, but they increasingly are being held back by weak domestic demand.” | Samuel Tombs, the chief UK economist at the Pantheon Macroeconomics consultancy, said: “UK manufacturers are riding on the coat-tails of their counterparts in the booming eurozone, but they increasingly are being held back by weak domestic demand.” |
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