Pound jumps as United Kingdom manufacturing activity rebounds

The sub-index for construction activity fell to 58.2, down 2.9 percentage points from July. That was the joint greatest month-to-month jump in the survey’s almost 25-year history.

While it fell to its lowest levels since February 2013, construction fell to its lowest levels since the depths of the global financial crisis, while services fell at the steepest rate since records began.

CHINA MANUFACTURING: An official monthly survey of factory managers, a barometer for manufacturing activity, came in at a better-than-expected 50.4 in August, on a 1-100 scale with 50 marking the break between contraction and expansion.

The Nikkei report said manufacturers were less optimistic towards hiring new staff last month to save on cost.

In Europe, the focus was on sterling and the United Kingdom manufacturing PMI survey for August, following a run of generally more upbeat-than-expected data that has taken the edge off concerns about a sharp decline in economic activity following June’s Brexit vote.

“Companies reported that work that had been postponed during July had now been restarted, as manufacturers and their clients started to regain a sense of returning to business as usual”, said Rob Dobson, senior economist at IHS Markit, in a statement.

The survey data is also a reflection of local companies’ concerns about the short-term outlook for new opportunities and production.

Manufacturers indicated that both the domestic and external markets had been sources of incoming new work.

Dave Atkinson, head of manufacturing at Lloyds Bank Commercial Banking (pictured), added: “British manufacturers have responded to the post-EU Referendum landscape by adopting a positive mind-set and adapting to the conditions in front of them to source new opportunities for their business”.

“Meanwhile, cost inflationary pressures intensified, with input prices increasing at the joint-second fastest rate in the series history”.

Output prices also rose at the fastest pace for five years.

An official measure of manufacturing activity in China rebounded to its strongest level in almost two years last month on improving production and demand, the government said on Thursday, boding well for the world’s second-largest economy.

London stocks closed in the red on Thursday as an upbeat report on United Kingdom manufacturing sent the pound higher, amid weak data out from the USA and China. In early trading it was at $1.1134, 0.22 per cent lower.

That followed a warning from Bank governor Mark Carney before the referendum that a vote to leave could tip the United Kingdom into recession. That could make it more expensive to trade with what is now the world’s biggest economic bloc.

The reading gave some relief after last week’s Ifo index showed that business morale deteriorated in August, as Britain’s vote in June to leave the European Union seemed to weigh on sentiment among German executives.