UK manufacturing growth unexpectedly picks up in September

South Africa, Johannesburg, Boksburg, Electrical component factory. 22 April 2010. An overview of the work done on the distribution boards for the emergency shafts related to the Gautrain. (Picture supplied)
South Africa, Johannesburg, Boksburg, Electrical component factory. 22 April 2010. An overview of the work done on the distribution boards for the emergency shafts related to the Gautrain. (Picture supplied)

UK manufacturing growth unexpectedly picked up in September, rounding off the third quarter on an upbeat note.

IHS Markit’s Purchasing Managers Index rose to 53.8 from a revised 53 in August and beating estimates for a drop to 52.5. Growth in output and new orders accelerated, while exports saw a modest recovery after a slump the previous month.

“September saw a mild improvement,” said Rob Dobson, a director at IHS Market. Still, “the latest survey is consistent with output expanding at only a moderate pace.”

The report showed that business optimism improved, although some firms noted that Brexit and exchange rate movements were making their forecasts less certain. There were also signs of strengthening inflation pressures for both input costs and output prices.

That will be of interest to Bank of England (BoE) policy makers, who are on the lookout for signs of domestically generated inflation as they gauge when next to lift the benchmark interest rate after a hike in August.

In an early sign of that interest rate increase on the economy, UK consumer borrowing posted its weakest growth in three years in August, following years of rapid expansion fuelled by a rapid buildup of debt used to finance cars and other goods.

The hike also prompted homeowners to lock in lower borrowing costs, with remortgage approvals gaining the most since the previous BOE increase in November.

BOE officials are due to get more insight later this week, when Markit publishes similar indices for the UK’s construction and dominant services sector.

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