UK manufacturers enjoyed an uptick in output and orders in September, according to the latest purchasing managers’ index reading compiled by IHS Markit.
The index reached a level of 53.8 in September, up from 53 in August. Any reading above 50 shows the sector is expanding. It is welcome news for the sector after data had shown that output fell for the first two quarters of the year. However, the survey showed that companies were increasing production to meet new orders, were clearing backlogs of work and were rebuilding inventories.
Rob Dobson of IHS Markit urged caution, however. He said that conditions in the sector remained “relatively lacklustre” and that, based on historical correlations with official data, the survey results indicated only moderate output growth.
Some said that Brexit was increasingly driving corporate decisions, and many were now stockpiling to avoid the expected supply disruptions in the run up to the Brexit deadline. Some companies were reducing their inventories because they envisaged less opportunity for sales around the Brexit deadline.
The UK’s dominant services sector also grew more slowly in September, as the IHS Markit PMI reading hit 53.9, down from 54.3 in August. Although down, it remains slightly above the 2018 average of 53.6, with new orders holding up well.
Finally, among the big three sector reports this week, construction activity expanded at its slowest rate in six months in September. Every element of the construction sector took a hit, with civil engineering contracting, while growth in residential and commercial building slowed. The overall index level hit 52.1 in September compared to 52.9 in August. A spokesman for IHS Markit said the data across the three sectors suggested that UK GDP rose by just under 0.4% in the third quarter - in line with expectations.
Meanwhile in the US, manufacturing activity also slowed slightly in September as tariffs appear to be taking their toll. The Institute for Supply Management said on Monday that its manufacturing index fell to a reading of 59.8% in September from 61.3% in August.
Manufacturing data from China showed that export orders were falling at the fastest rate in two years, appearing to confirm suspicions that the US tariffs were having an impact. The Caixin/Markit Manufacting PMI for September fell to 50 in September from 50.6 in August.
In the US, more positive news: the number of Americans filing for unemployment benefits dropped by more than forecast last week, according to data from the Labor Department. US initial jobless claims dropped by 8,000 to 207,000. Economists had been expecting a smaller drop to 213,000.
UK house prices rose gradually in September but the London market continued to fall, according to the latest house-price report from Nationwide. The data showed an average 2% annual price increase across the UK, with an average 0.3% rise in August/September. However, average London prices fell by 0.7% in the same period. Yorkshire & Humberside was the UK’s strongest region, with prices up by 5.8% over the year. Commentators say that until the threat of a no-deal Brexit is gone, buyers and sellers will hold back from the market.
Main source of information: Company Report and Accounts, Bloomberg
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