U.K. Manufacturing Index Rises as Factories Clear Order Backlogs

A U.K. manufacturing index unexpectedly increased in September from a 26-month low as producers attempted to clear backlogs of orders.

The gauge, based on a survey by Markit Economics and the Chartered Institute of Purchasing and Supply, rose to 51.1, the highest reading in three months, from a revised 49.4 in August, according to an e-mailed report in London today. The median forecast of 28 economists in a Bloomberg News survey was for the measure to fall to 48.5 from an initially reported 49. A level above 50 indicates expansion.

Output rose last month as factories depleted backlogs of work at the fastest pace for two years, while promotional activity and new product launches also provided a boost, CIPS Chief Executive Officer David Noble said. Manufacturing activity shrank in the euro area and Switzerland in September, according to separate reports today. Bank of England officials will meet this week to consider whether to restart its bond-purchase program to aid growth.

“The U.K. manufacturing figures will offer some cause for relief,” Noble said in a statement. “However, we are still a long way off from celebrating. The overall picture is rather downbeat as growth for the third quarter is well below the average and employment continues to fall, adding to a subdued mood.”

The pound remained lower against the dollar after the report was published. It traded at $1.5516 as of 10:06 a.m. in London, down 0.4 percent from yesterday.

Faltering Recovery

The U.K.’s economic recovery is faltering as the global economy slows, Europe’s debt crisis weighs on the largest market for British goods and the government implements the biggest fiscal squeeze since World War II to narrow the budget deficit.

The Bank of England may resume its bond-purchase program on Oct. 6, according to nine out of 30 economists in a Bloomberg News survey. That’s the highest proportion since November 2009, when the central bank last expanded the program. The rest say the bank will hold the program at 200 billion pounds ($311 billion).

All 53 economists in a separate survey see no change in the Bank of England’s key interest rate, which is at a record low of 0.5 percent.

U.S. factory-output growth probably slowed in September, economists said before a report today. The Institute for Supply Management’s manufacturing index fell to 50.3 last month from 50.6 in August, according to the median estimate of 67 economists surveyed by Bloomberg News. The Tempe, Arizona-based group will release the ISM results at 10 a.m. New York time.

To contact the reporter on this story: Scott Hamilton in London at shamilton8@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.