Manufacturing weakness adds to BoE woes

Growth in UK manufacturing output stalled for the first time in two years the latest Industrial Trends survey from the Confederation of British Industry showed.

Manufacturing weakness adds to BoE woes

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According to the CBI, manufacturers’ expectations for growth in export volumes are at their weakest since October 2013.

The stall in growth came at the same time as total orders slipped and export orders fell to their lowest level in six months.

The numbers come the week after the Federal Reserve chose to keep rates on hold, and provide further food for thought for the Bank of England, that has been particularly aware of the impact the strong currency has had on the UK economy.

Rain Newton-Smith, CBI Director of Economics, said many view exports as the missing link in the UK recovery. And, while manufacturing has disappointed the market for some time now, in particular weighed down by the strong pound, many manufacturers will now be focused on the longer term impacts of China’s slowdown.

Ben Brettell, senior economist at Hargreaves Lansdown agrees that British manufacturing figures have been disappointing for a number of months and so the below expectation numbers weren’t too surprising. But, he added, the magnitude of the deterioration is of some concern.

“The key variable is the strength (or otherwise) of sterling. Exporters desperately need a weaker pound to make their goods cheaper for overseas buyers, with the situation exacerbated by economic turmoil in China. At present sterling’s relative strength against the currencies of the UK’s trading partners is putting pressure on an already beleaguered sector, though lower commodity prices are easing the burden for some.”

According to the CBI, 26% of firms reported that output grew in the three months to September, while 25% said it decreased giving a rounded balance of 0%, slightly below the long-run average of +3%.

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