UK manufacturing PMI hits 17-month low

The strong upsurge seen in the UK manufacturing sector at the start of the year is showing signs of having run its course. September's Markit/CIPS PMI hit a 17-month low of 51.6, having been as high as 57.0 back in April.

Growth of new orders eased to near-stagnation, with inflows of new work slowing in both domestic and export markets. At 50.4, the New Export Orders Index was the lowest since March of last year. Overseas demand was reined in mainly by the ongoing lethargy of the eurozone and the appreciation of sterling against the euro.

The weakening of the manufacturing PMI data in August was cited as a major concern among the Bank of England's Monetary Policy Committee. September's disappointing reading will therefore add to the air of caution as to whether the economy is ready for higher interest rates.

PMI releases later this week on construction and the dominant service sector will be scoured for signs that the slowdown in the goods-producing sector may have spread to other sectors.

Also important will be the trend in prices. With manufacturers reporting weaker selling price increases and a fall in input costs, the picture of waning inflationary pressures painted by industry may provide some leeway for the Bank of England to hold off from raising rates even if strong growth persists.

Some help to manufacturers may already be on the way: the disappointing PMI reading pushed sterling to a two-week low on the back of reduced interest rate hike expectations.

View the full press release here.

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