UK Manufacturing PMI up to a ten-month high
The UK Manufacturing PMI soared to 53.3 in August, recovering from its 41-month low level of 48.3 in July. The month-on-month jump (+5.0 points) was the greatest ever registered in the survey’s history. Manufacturers’ sentiment recovered as they returned to business as usual post-Brexit.
All sub-indices seem to have contributed positively to the August rebound. Manufacturing production expanded, with the consumer goods sector being the major driver of the increase in output. Employment also recovered slightly as hiring activity expanded in SMEs. And manufacturers recorded a surge in new orders both domestically and internationally.
The Sterling depreciation helped, but...
The Sterling depreciation largely contributed to manufacturers’ order books upswing in the past month. Overseas sales expanded mainly as a result of the currency depreciation in markets such as the USA, Europe and China.
It is not all good about the Sterling depreciation however. Manufacturers also faced rising input costs in August which surged to a five-year high as import prices soared. Output prices also moved upward, but to a lower extent than the surge in input prices. While the pass-through of the Sterling depreciation into consumer prices is under way, it is squeezing manufacturers’ profit margins in the short term. This is in line with figures we've previously highlighted.
Brexit from abroad
The surge in the UK Manufacturing PMI contrasts with poorer European performance. Indeed, the eurozone manufacturing PMI moved downward in August to 51.7, with Italy and France printing below the 50 no-change mark.
Back for good?
While the August printing largely surprised upward, it is in line with erratic movements we've been seeing in the past few months for the manufacturing PMI. Rather than a sustained expansion, it is likely that volatility will prevail in the coming months.