August’s manufacturing PMI showed export orders flowed in at their fastest rate since June 2014, although overall order growth was below June’s rapid pace.
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“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 Markit.
However, the Brexit vote was still the main factor weighing on activity, the report said.
Lurking beneath the surprisingly strong rebound in manufacturing shown by the latest Markit/CIPS PMI, there were clear signs that inflation is about to shoot higher -and perhaps in a big way.
The report said that the boost to PMI had been led by a rise in production, new orders and employment.
That pushed factories to increase production and the output sub-index climbed to a 12-month peak in August.
The ISM manufacturing PMI index for August was much weaker than expected, dropping to 49.4 from 52.6 in July and more than the expectation for it to come down to 52.0.
The Australian Industry Group’s performance of manufacturing index (PMI) edged down 9.5 points to 46.9 in August, falling below the 50-level indicating the sector is expanding.
But the sector continued to shrink as any number below 50 signals contraction.
The drop in sterling following the European Union referendum result has made British products cheaper, boosting export orders to a 26-month high with increased demand from the US, Europe, China, south-east Asia, the Middle East and Norway.
The Office for National Statistics (ONS) said construction output dropped by 0.7% in the second quarter, following a 0.3% fall in the first quarter, meaning the industry recorded two consecutive quarters of negative growth for the first time since 2012.
Markit – the firm which compiles the survey results from thousand of companies – predicts further weakness in September thanks to a slowdown of new orders.
Manufacturing is seen as a potential victor from the referendum result as the subsequent sharp fall in the value of the pound makes United Kingdom goods cheaper and more attractive for overseas buyers.
The dollar however was also weakened by a downbeat jobs report in the U.S. that dimished the chances of a rate rise from the Federal Reserve this month.
However, Markit pointed out that the negative consequences of currency movements were felt in the rising costs of raw materials from overseas, with 44% of firms reporting an increase in purchasing costs.
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Dominic Bryant, UK economist at BNP Paribas, said a closely-watched survey of the services sector next week would provide a more accurate picture of the impact of the Brexit vote on the economy.
