Separate figures from the Institute for Supply Management showed growth in the United States economy’s manufacturing sector slipped a lot more than expected in August, moving into contraction territory.
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Riding on the back of robust export and domestic orders, the Nikkei India Manufacturing Purchasing Managers’ Index (PMI) – a composite single-figure indicator that tracks manufacturing sector performance – rose to a 13-month high of 52.6, a level last seen in December 2014, according to data released on Thursday (Sept. 1).
Economists had been predicting a modest rise in the index to around 49, with any measure below 50 indicating manufacturing was still in decline.
The weak pound makes United Kingdom goods and services cheaper for overseas buyers, increasing the cost of imports.
The drop in the pound, which lost some 12 percent against the dollar since the vote, boosted export orders in August by making them more price-competitive in the worldwide market place. For the protection of AP and its licensors, content may not be copied, altered or redistributed in any form.
The pound hit 31-year lows against the dollar after Britain voted to leave the European Union in a June referendum and has struggled to recover following the Bank of England’s decision to cut its key interest rate to a record-low 0.25 percent.
“The recent depreciation of sterling drove higher inflows of new business from the USA, Europe, Scandinavia, Middle East and Asia”.
The relapse to shrinking activity in August raises some doubts about the recovery.
The weak PMI surveys of July suggested the economy had begun to contract at the fastest rate since the 2008-09 financial crisis and were a big factor behind the BoE’s decision on August 4 to cut rates to a record low and restart bond purchases.
He said they backed the view “that the economy is set for a period of slower growth, rather than a full-blown recession in the near term”.
A separate survey of China’s manufacturers found that factory activity in that country expanded at the fastest pace in almost two years.
Factory activity reaches a 10-month high in August.
Industrial output rebounded in June, both in volume and in value, from a year earlier.
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.
However, British manufacturers staged one of the sharpest rebounds on record in August, a post-Brexit surprise that could prompt the Bank of England to rethink the need to cut interest rates again if other surveys confirm the trend.
“Business has carried on as normal and the weaker exchange rate is providing support for exporters in a broad range of markets in fairly short order”.
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Economists will also be concerned by the strength of inflation pressures now facing builders. A figure above 50 indicates expansion.
