Pound jumps as UK manufacturing activity rebounds

 

The value of the pound has jumped after a survey indicated the UK's manufacturing sector rebounded sharply in August.

The Markit/CIPS purchasing managers' index (PMI) for the sector rose to 53.3 in August from July's figure of 48.3. A figure above 50 indicates expansion.

The weakening of the pound following the Brexit vote boosted exports, the survey found.
However, it also indicated that the weak pound had pushed up firms' costs.
A weakening of the pound makes UK goods cheaper for overseas buyers, but increases the cost of goods imported into the UK.

Since the Brexit vote, the pound has fallen in value by more than 10% against both the US dollar and the euro.
Following the release of the latest PMI survey, the pound jumped by 1%, more than a cent, against the dollar, hitting $1.3267, before slipping back to $1.3247. Against the euro, the pound was 0.9% higher at €1.1877

Markit said the month-on-month increase in the PMI level was the joint largest in the survey's 25-year history.
"The August PMI data indicate a solid rebound in the performance of the UK manufacturing sector from the steep downturn that followed the EU referendum," said Rob Dobson, senior economist at IHS Markit.
"The domestic market showed a marked recovery, especially for consumer products, while the recent depreciation of sterling drove higher inflows of new business from the US, Europe, Scandinavia, Middle East and Asia," he added.
Mr Dobson also said that inflation was "raising its ugly head".
"Rates of increase in input prices and output charges both hit five-year highs, which manufacturers placed squarely at the door of the cost impact of sterling on import prices," he said.