This breaks a five-month streak of above-50 readings and signals that the manufacturing sector remains under pressure.
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Earlier, Markit Economics’ purchasing manager’s index for August came in at 52, down from July and little changed compared to the consensus forecast. The pound strengthened against the USA dollar and hit a one-month high against the euro after the stronger than expected report.
Meanwhile the Commerce Department reported that construction spending in the United States was almost flat in July from June at an annual pace of $1.15 billion.
He said there were still widespread reports that Brexit uncertainty was dampening demand, with total new order volumes continuing to fall in August.
The latest numbers in the Markit/CIPS purchasing managers’ index (PMI) suggest that the weak sterling rates since the June 23rd Brexit referendum result has been good news for exports.
However the market defied expectations hitting 49.2 in August.
“Demand likely will crumble when construction companies pass on these higher costs to customers”, said Samuel Tombs, economist at consultancy Pantheon Macroeconomics.
Howard Archer, chief United Kingdom economist at IHS Global Insight, said that while the survey provided reassurance on the current state of the manufacturing sector, there are still “serious concerns” for the economy following the 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”. Against the dollar, sterling rose to $1.3252 from $1.3138.
The weaker pound following the vote to leave the European Union (EU) boosted new export business last month and helping to increase manufacturing output to its highest level since November 2015. On the flip side, increased business orders did not result in substantial job creation, notwithstanding some additional hiring by firms. It had hit a four-week high of $1.3318 on Thursday.
Output prices also rose at the fastest pace for five years.
Australian factory activity has slumped to its lowest level in more than a year on the back of a slowdown in food and beverage manufacturing.
It was one of the pieces of evidence that contributed to the Bank of England’s recent decision to cut its interest rate to 0.25%.
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All eyes will now be on services output for August, which is to be released on Monday.
