Manufacturing falters as global demand weakens

01 Sep, 2016 4:31 pm
LONDON/SINGAPORE – 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]

Manufacturing growth in the currency bloc slowed during August. Much of the expansion remained focused in the north, and the survey hinted at a further slowdown this month.

Germany, the Netherlands and Austria again provided the main power. France and Italy showed declines, Greece stagnated and both Spain and Ireland saw their worst growth since mid-2013.

Markit’s PMI for the bloc dipped to 51.7 in August from 52.0, below a flash estimate of 51.8. An index measuring output came in at 53.3, below July’s 53.9.

Manufacturing growth in the United States also eased last month, data are expected to show later on Thursday. reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/econ-polls?RIC=USPMI%3DECI


Coming a week after the U.S. posted sluggish second-quarter growth, the uninspiring manufacturing surveys may give Federal Reserve Chair Janet Yellen pause before a Fed meeting on Sept. 20-21 to decide whether to raise interest rates.

In China, the world’s second-biggest economy the official PMI ticked up to 50.4 in August, compared with the previous month’s 49.9. But the private Caixin PMI, which covers a greater share of smaller firms, showed activity stagnated last month.

“While it is encouraging that manufacturing activity appears to be stabilizing, there is a risk that this is a ‘calm before the storm’ moment for the sector,” said Danae Kyriakopoulou at Cebr.

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