Manufacturing falters as global demand weakens

Thu Sep 1, 2016 1:59pm EDT
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By Jonathan Cable and Shri Navaratnam

LONDON/SINGAPORE (Reuters) - Manufacturers across Asia and Europe showed few signs of returning to health in August, as demand remained fitful at best, although British factories bucked the global trend, surveys showed on Thursday.

Britain's manufacturing rebounded from the shock of June's vote to leave the European Union, helped by a boost to exports from sterling's post-Brexit slump [GB/PMIM].

Recent data have shown consumer demand holding up, and Thursday's survey suggests manufacturing, which accounts for 10 percent of Britain's economy, is weathering the impact of the vote better than feared.

"The plunge in sterling is boosting the UK's competitiveness, which is helping to support export orders, while the aggressive stimulus from the Bank of England and the smooth transition of political leadership has also helped calm immediate fears for the economy," said James Knightley at ING.

"Nonetheless, the risks of recession have not disappeared and with surveys still suggesting a significant pullback on hiring and investment intentions we remain concerned about the prospect of a weaker performance around the turn of the year."

The UK Markit/CIPS Purchasing Managers' Index (PMI) jumped to a 10-month high of 53.3 in August after tumbling to a three-year low in July following the referendum. A reading above 50 indicates growth.

August's monthly surge was the joint largest in the manufacturing survey's near 25-year history and beat all forecasts in a Reuters poll of economists. After the release, the pound jumped over a cent to $1.3250, putting it on course for its best day in two weeks. [GBP/]

However, survey compiler Markit said reduced sales to Britain were partly to blame for slowdown in orders in the neighboring euro zone. [EUR/PMIM]   Continued...

Factory chimneys are seen at Keihin industrial zone in Kawasaki, south of Tokyo, Japan, August 18, 2016. Picture taken on August 18, 2016.  REUTERS/Kim Kyung-Hoon/File Photo