Manufacturing activity picked up slightly in October, but a sharp decline in new export orders sounded alarm bells for the sector.
The latest reading from the Markit/Chartered Institute of Procurement & Supply (Cips) activity survey came in at 53.2, up from 51.6 in September and well above the 50 mark that signals growth. The reading was higher than analysts had expected and follows three successive months of slowing growth.
However, the breakdown of the results revealed new export orders falling at the fastest pace in 21 months. There was a pronounced decline in eurozone export orders but some manufacturers surveyed also mentioned slower demand from the US and China.
“It was the UK picking up the new business tab, as the eurozone continued to experience weakened economic growth with the added punch of unfavourable exchange rates” David Noble, Cips’ chief executive, said.
Rob Wood at Berenberg Bank said: “The risk to the UK from the eurozone is not the direct impact of weak exports, which Britain could easily ride out, but rather the potential for uncertainty to infect UK domestic demand as companies perhaps put off investments” .
Minutes from the Bank of England’s Monetary Policy Committee meeting last month showed most members concerned about the eurozone economy, which is grappling with weak inflation and negligible growth.
Economists said the UK manufacturing survey reading pointed to quarterly growth in the official measure of manufacturing output of only about 0.2 per cent, following the 0.4 per cent estimated quarterly rise in the third quarter. The level of manufacturing output remains 4.6 per cent below pre-crisis levels.
The PMI survey underlined the lack of inflationary pressure in the economy, with factory gate prices rising at their weakest pace in 16 months on the back of lower raw material costs. Input prices fell for the second successive month.
Manufacturers also hired at a slower rate than in September, with the rate of job creation the second-weakest since June 2013.Reuse content