Britain’s manufacturing growth weakens as price pressures slip

Bloomberg

UK manufacturing growth slowed for a second month in February and price pressures cooled, a sign that the effects of the pound’s drop may be easing. IHS Markit’s Purchasing Managers Index fell to 54.6 from
a revised 55.7, above the 50-mark dividing expansion from contraction but below economists’ expectations for 55.8.
The pound’s fall since the UK’s June referendum on European Union membership has had mixed effects for manufacturing, making goods cheaper for overseas buyers while also boosting costs for producers. A gauge of input prices slipped from a record high last month.
“The impact of the weak sterling exchange rate on prices is starting to subside, providing welcome respite with regards to pipeline inflationary pressures,” said Rob Dobson, senior economist at Markit. “The big question remains as to whether robust growth can be sustained or whether it will continue to wane in the coming months.”
The pound weakened after the report was published and was trading at $1.2369 as of 9:40 a.m. in London. The Bank of England expects the UK economy to cool this year as faster inflation strips consumers of purchasing power. While manufacturing won’t make up for weaker domestic demand, Markit’s index indicates quarterly growth of 1.5 percent, which would be one of the best performances in seven years.
Output-price growth remained near January’s near-record level. The weakness of the pound helped boost demand from Europe, the US, and Asia, Markit said. In the long term, much will depend on the deal UK Prime Minister Theresa May strikes with EU leaders once she begins exit negotiations from the bloc later this month. She’s indicated that she will prioritize reducing immigration over access to the single market, meaning there could be some increase in trading costs.