LONDON, Oct. 2 (Xinhua) — The British manufacturing sector continued to grow at a robust pace in September, driven by growth in the Eurozone.
Figures released on Monday showed the Purchasing Managers’ Index (PMI) for the manufacturing sector still growing, with the index hitting 55.9 (above 50 indicates growth).
“The manufacturing sector still looks like it has put in a solid performance over the third quarter,” Ruth Gregory, an economist with London economic data analysis firm Capital Economics told Xinhua.
British manufacturers are benefitting from a booming Eurozone, the country’s largest export market. Eurostat figures in September showed that growth in the single currency area was 0.6 percent quarter-on-quarter and 2.3 percent on an annual basis.
However, the British GDP growth figure is showing a decline in its rate of growth, revised down late last month to 1.8 percent growth per annum. This is also reflected in the manufacturing PMI figures as for the 11th month in the last 12, the manufacturing PMI was weaker in Britain than in the Eurozone.
The September PMI was a fall on the August figure of 56.7 but that was a four-month high coming on the back of earlier decline in the sector this year, and is well above the long-term average of 51.7.
“The headline balance was below expectations, and output and new orders balance dipped as well,” said Gregory.
“However, some pull back after two months of strong gains was always likely. But if you look at the three-monthly figures and look at the survey’s output balance, it is still consistent with manufacturing growth of just under 1 percent growth in Q3 and that would mark a big change from the 0.3 percent contraction we saw in Q2.”
Manufacturing has been stimulated by the depreciation in sterling on foreign exchange markets after the Brexit referendum vote at the end of June 2016.
“UK manufacturers are riding on the coattails of their counterparts in the booming Eurozone, but they increasingly are being held back by weak domestic demand,” said Samuel Tombs, an economist at London-based economic analysis firm Pantheon Macroeconomics.
Britain’s central bank the Bank of England (BOE) has given indications in recent reports from its rate-setting Monetary Policy Committee (MPC) that it expects to raise the bank rate from its record low of 0.25 percent “within months”.
Many experts are tipping a November rate rise, as the BOE rewinds the cut it made in August 2016 in the bank rate to offset any negative impact from the Brexit vote.
These manufacturing PMI figures do not indicate a worsening economic situation, but Gregory warned that they could not be taken as supporting data for a rate rise.
“We would not want to read too much in one month’s figures,” she said. “If you look at Q3 figures, we remain confident that manufacturing will stage a recovery in Q3 and help GDP growth to gain a little more pace in the second half this year.”