Sterling rose after Markit’s latest survey of the sector showed factories were returning to “business as usual” following a steep downturn in activity immediately after the June 23 poll.
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“Demand likely will crumble when construction companies pass on these higher costs to customers”, said Samuel Tombs, economist at consultancy Pantheon Macroeconomics.
The Australian Industry Group Performance of Manufacturing Index ended 13 straight months of expansion in August, with the sector and overall economy described as patchy.
The seasonally-adjusted Market/ CIPS figure remained below of the 50, no-change threshold for the third consecutive month, but was an improvement on July’s 45.9 – an 85-month low. In Asia, recently released PMI manufacturing reports from China and Japan were mixed, with China’s NBS PMI surprising with a rise to 50.4, the Caixin PMI dipping to 50.0 while Japan’s PMI edged lower to 49.5.
Markit said the month-on-month increase in the PMI level was the joint largest in the survey’s 25-year history.
The pound leapt by more than a cent against the dollar to $1.3241 immediately after the data were released and hit a four-week high of $1.3328 after weak U.S. manufacturing data put pressure on the greenback.
Sterling rose to a one-month high against the euro after the construction data and British shares also rallied.
Rob Dobson, senior economist at Markit, said: “The August PMI data indicate a solid rebound in the performance of the United Kingdom manufacturing sector from the steep downturn that followed the European Union referendum”.
Reports from survey respondents suggested that Brexit uncertainty continued put the brakes on the construction sector during August, especially in terms of house building and commercial work, Markit added.
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“The continuing patchiness both of the manufacturing sector and the broader economy underscores the importance of lifting confidence and improving policy settings in areas such as workplace relations, taxation and budgetary policy”, said Willox.
