UK manufacturing activity jumps in October after months of near-stagnation, sending the pound up against the dollar and euro.
UK manufacturing bounced back in October, as a rise in new orders and “surging growth” at larger companies pushed up activity at one of the fastest rates on record.
The pound jumped by half a cent against the euro and dollar on Monday after Markit’s closely-watched survey of the sector showed output climbed last month to its highest since June 2014.
Markit also said the 3.7 point rise in the PMI level was “one of the steepest registered” since the survey began 24 years ago.
Domestic demand continued to drive the expansion in the sector, although Markit reported consecutive increases in new export business for the first time since the final quarter of 2014, with rising demand from the Middle East, East Asia and the US.
Rob Dobson, senior economist at Markit, said October’s reading was consistent with quarterly output growth of 1pc, suggesting that the sector would emerge from recession in the final three months of 2015.
“The revival provides a tentative suggestion that the manufacturers are pulling out of their recent funk, having been dogged by recession since the start of the year, and may help boost economic growth in the fourth quarter,” he said.
However, while growth in output and new business was “broad based”, Markit noted that “strong and surging growth” at bigger companies contrasted with a more “subdued expansion” among small and medium-sized businesses.
Markit said the sector created jobs for a thirtieth straight month, after revised data showed reports last month that employers has started to shed workers were premature.
The rise was again led by large-scale producers, as smaller factories saw little change in employment since September.
Analysts described October’s rise as “impressive” but said it was likely that some of the rise in overall output last month was “erratic”. Most expect activity to moderate in the final months of the year.
“Given that the factors which have undermined manufacturers this year, namely a strong pound and soft overseas demand, remain prominent, we continue to be cautious about the degree to which manufacturing will recover,” said Martin Beck, senior economic adviser to the EY ITEM Club.