UK manufacturing PMI misses expectations in October

The Markit/CIPS UK manufacturing purchasing managers’ index fell to 54.3 from 55.5 in September, missing expectations for a reading of 54.5. Still, it remained well above its long-run average of 51.5.

Markit pointed to marked expansions of new business and production, with new order volumes increasing for the third month in a row and at a pace close to September’s recent high.

The effect of the depreciating pound was a major feature of the latest survey, with manufacturers saying this helped efforts to increase inflows of new export business, resulting in new orders from the USA, the EU and China.

However, there was also a significant cost impact, reflecting higher import prices and in the costs of products based on dollar-denominated commodities such as oil.

Of the companies offering a reason for an increase in average purchasing costs, around 90% alluded to the sterling exchange rate.

Rob Dobson, senior economist at survey compilers Markit, said: “The UK manufacturing sector remained on a firm footing in October and should return to growth in the fourth quarter. Despite slowing from September’s highs, growth of output and new orders continued to defy expectations, rising at marked rates and supporting the fastest job creation in a year.”

“The main topic of the latest PMI survey was, however, the impact of the sterling depreciation on manufacturers. On the positive side, the boost to competitiveness drove new export order inflows higher, providing a key support to output volumes. The down-side of the weaker currency is becoming increasingly evident, however, with increased import prices leading to one of the steepest rises in purchasing costs in the near 25-year survey history.”