UK Economy Boosted by PMI Survey

UK manufacturing growth has recovered momentum according to a latest purchasing managers’ index (PMI).

Figures released from a survey conducted by financial services information company Markit, alongside the Chartered Institute for Procurement and Supply, concluded that manufacturing PMI rose to a 16 month high of 55.5.

The results for October are a significant improvement from the September survey, where the index reported a figure of 51.8 from industry feedback.

The month on month increase of 3.7 points, was the highest recorded in the study’s 24 year history.

Improvements in the manufacturing sector, mostly arrived from rates in output growth and new orders.

New contracts in the sector were mostly sourced from the domestic market, additionally back to back monthly increases in fresh export trade was found for the first time since the third quarter of 2014.

Overseas markets for manufacturing grew in the Middle East, East Asia, and also in the United States.

However, one downside of the results were that Markit revealed, that there was a disparity as large companies have been mainly responsible for driving the growth, compared with and the slower expansion of the SMEs in the manufacturing industry.

This was reflected in the employment levels in the industry, as bigger companies reported a robust increase in their levels of staff.

In Comparison, there was little change in employment numbers for manufacturing SMEs between September and October.

Costs are also being reduced as global commodity prices fall, including for metals, plastics and timber.

Oil prices have continued to be low, with Brent crude oil still below $50 per barrel according to the latest information. The PMI survey also found that oil related products prices were also lower.

Overall Markit said that price cost deflation was slower than in September, where there was a 16 year record for low material expenses.

PMI Survey Contradicts Latest UK Growth Figures.

Despite the mostly positive news in this survey, official figures contradict was found in the PMI survey.

For the third quarter this year, UK growth had slowed to 0.5%, down 0.2% from the second quarter.

The figure was also below the 0.6% mark, that many analysts felt would be the growth level for the quarter.

The manufacturing sector was part of the reason why then UK economy was sluggish between July and September, as growth fell by 0.3%.

Although the construction sector remains the biggest thorn in the side of the UK economy, as the sector dropped by a huge 2,2%, the most considerable  fall for three years.

Pound Continues to Slip After PMI Survey Release.

At the beginning of the week the Pound gained on the US Dollar following the PMI survey release, reaching over the 1.548 mark yesterday evening.

The Pound has now fallen to 1.542, which is a slight recovery from this morning’s nadir of approaching the 1.54 mark.

There was a similar pattern with the Euro, as Pound climbed to 1.406 to the Euro yesterday morning.

That fell to 1.4 in the early hours of this morning, before jumping back up to 1.404.

All eyes will now be Thursday’s Bank of England’s meeting. Expectations of a United States interest rate hike have heightened, which could let to a UK interest rate rise, as often the Bank of England has followed events across the Atlantic.