British manufacturing activity strengthened in July — growing faster than France, Spain and Ireland — amid the second-strongest rise in foreign demand in at least two decades, according to a survey by IHS Markit (
www.ihsmarkit.com).
New orders from the USA, Canada, Asia and Europe helped to drive up production and employment, as manufacturers enjoyed a “significant boost” from new export business, a sign that the weaker pound is helping to boost overseas demand and the global recovery is gaining traction.
Employment in the sector rose for the 12th consecutive month, according to the survey, with the pace of expansion among the strongest registered over the past three years. This pushed up the IHS Markit purchasing managers’ index to 55.1 in July (from 54.2 in June), well above the 50 level that divides growth from contraction.
However, in a separate report, euro-zone growth figures showed that the 19-nation bloc expanded at 0.6pc in the second quarter — twice the pace of the UK.
Rob Dobson, a senior economist at Markit, said the global upturn was becoming an increasing factor in the rise in manufacturing activity: “Although the exchange rate remains a key driver of export growth, manufacturers also benefitted from stronger economic growth in key markets in the euro area, North America and the Asia-Pacific region.”
Mr Dobson noted that price pressures continued to ease back, which he said would help the Bank of England to keep interest rates low “until the medium-term outlook for economic growth becomes less uncertain.”
Analysts at Capital Economics said the PMI data indicated that the sector started the third quarter growing at 1%. However, strong survey data in recent months has contrasted with official figures, which showed the manufacturing sector contracted by 0.5% in the three months to June.
Chris Williamson, chief business economist at IHS Markit, said historic data suggested that the current weakness in the official data was “temporary”.
“A resumption of growth will be seen in the third quarter, providing PMI data remain above 52.6 in August and September.”