Thursday 1 September 2016 9:45 am

Weathering the Brexit storm? Pound jumps almost one per cent after UK manufacturing PMI smashed expectations

Growth in the UK's manufacturing sector smashed expectations in August – suggesting the manufacturers are weathering the Brexit storm.

Markit's purchasing managers index (PMI) for the sector jumped to 53.3 in August, figures published today showed. That's not only the highest in 10 months, but way above expectations of 49 (N.B. any figure above 50 denotes growth).

It's also a huge turnaround from the previous month, when the UK manufacturing PMI slumped to its lowest level in more than three years

So impressive was the figure, the pound up almost one per cent against the dollar, to $1.3263, its highest since the beginning of August. 

"British manufacturers have responded to the post-EU referendum landscape by adopting a positive mind-set and adapting to the conditions in front of them to source new opportunities for their business," said Dave Atkinson, head of manufacturing at Lloyds Banking Group.

"Growth is being driven by exporters, with manufacturers experiencing increased demand for goods from both existing markets and unchartered territories due to the weakened pound.

"The manufacturing community has been agile in its response to this influx of orders, and cementing long-term relationships with new markets could have a significant impact on economic growth in the coming months and years as the outcome of leaving the EU is played out."

Meanwhile, things were looking less encouraging in the Eurozone's manufacturing sector, where the PMI fell to a three-month low last month

"Growth may wane further in September after new orders growth slipped to a one-and-a-half year low," said Chris Williamson, IHS Markit's chief business economist. 

"Anecdotal evidence suggests that the strengthening of the euro and reduced sales to the UK were partly to blame for the order book slowdown."

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