‘Nevertheless, the near-stabilisation in construction activity in August reported by the purchasing managers following on from manufacturing activity bouncing back to a 10-month high adds to the mounting evidence that the economy has so far held up pretty well following June’s Brexit vote’. But the private Caixin version of the PMI, which covers a greater share of smaller firms, showed activity stagnated last month with the index at 50.0, from an unexpectedly upbeat 50.6 in July.
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The UK gilts slumped Friday after recent data showed that construction PMI rebounded higher than expected in August.
Manufacturing production rose at the fastest rate in seven months, following a contraction in the prior month. The news had the pound bouncing 1% against the euro on Thursday. Any upbeat data, especially on the job market, will be closely watched by the Federal Reserve as it could push the U.S. central bank closer to raising interest rates.
USA jobless claims data today helped the dollar climb to a fresh one-month high but its gains were capped just below the key 104 yen level after the greenback reversed back down on disappointing ISM manufacturing data.
Reports from survey respondents suggested that Brexit uncertainty continued to act as a brake on the construction sector during August with commercial building and housing activity both slowing but at a reduced pace than July.
This is the highest print since October 2015 and it is evident that the weak GBP is helping to shore up foreign demand for United Kingdom exports, with the survey showing a surge in the export orders sub-index to 54.9, its highest since June 2014, from 51.4 in July.
New orders rose at a more sluggish pace compared to July, causing a hiring slowdown. “But it remains to be seen whether this expansion of activity is merely filling the post-Brexit void or whether this strong performance will continue”.
The ISM PMI for the month fell to 49.4, down from 52.6 in July. “Firms recorded an easing in cost inflation during the month, which in turn resulted in a softer overall increase in factory gate charges”, financial services firm IHS Markit, which compiles the monthly report, said in a statement here.
A plunge in new orders led declines among all the measures that make up the index.
As economist Rob Dobson at IHS 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”.
Official figures last month showed the industry had fallen back into recession for the first time in four years.
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He said that while the economy is holding up well, there is concern that it will lose momentum in the coming months as uncertainty rises over when Article 50 will be triggered.
