U.K. Manufacturing ‘Near Stagnant’ as Export Demand Drops

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U.K. factories saw export demand fall for a fourth month in July, restraining growth in the manufacturing industry.

A Purchasing Managers’ Index increased to 51.9 from 51.4 in June, which was the lowest in more than two years, Markit Economics said on Monday. Economists in a Bloomberg survey had forecast 51.5. Export orders fell, with euro-area demand hit by the pound’s strength, according to the report.

Markit said the gauge points to weak growth after manufacturing shrank in the second quarter. U.K. factories are struggling as sterling’s advance and weakness in the euro region weigh on foreign demand. While the domestic economy is strengthening, risks from the external environment mean the Bank of England is likely to keep interest rates at a record low this week.

“Near-stagnant” growth suggests manufacturing is continuing to act as a drag on the economy, said Rob Dobson, an economist at Markit in London. “The struggling manufacturing sector, and the impact of the strong pound on export performance, will be a worry for the Bank of England,” he said

Markit said growth in total new orders at factories cooled in July to the slowest in 10 months. Employment rose, and selling prices increased the most in almost a year.

“This is good enough to keep employment prospects growing across manufacturing,” said Lee Hopley, an economist at the EEF, an industry group. “But until something gives in export markets or oil and gas investments, the outlook for growth will remain modest.”

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