U.K. Factory Expansion Slows in September From 2 1/2-Year High

A U.K. manufacturing index fell in September from a 2 1/2-year high as export demand slowed.

A gauge of factory activity declined to 56.7 from a revised 57.1 in August, Markit Economics said today in London. That’s above the 50 level signaling growth. Economists forecast 57.5, based on the median of 25 estimates in a Bloomberg News survey. A euro-area manufacturing index slipped to 51.1 from 51.4 in August, in line with an initial estimate on Sept. 23.

Britain’s recovery has strengthened after growth accelerated to 0.7 percent in the second quarter. Chancellor of the Exchequer George Osborne said yesterday the economy has “turned a corner.” While Bank of England Governor Mark Carney says he doesn’t see an argument for expanding quantitative easing, he’s pledged to keep interest rates low until unemployment falls to 7 percent from the current 7.7 percent to ensure the recovery.

“Manufacturing continues to boom, adding to the flow of upbeat data which suggest that the economy is growing faster than almost anyone expected,” Markit economist Rob Dobson said in today’s report. “This stronger-than-expected performance will raise further questions in the City with regards to the Bank of England’s forward guidance on interest rates.”

A measure of new orders “lost only minor impetus” in September, factory payrolls rose the most since May 2011 and inflation increased at the fastest pace in two years, according to the report. New export business expanded the least since May.

Markit’s euro-area factory measure showed output expanded for a third month in September as the 17-nation currency bloc’s economic recovery gained momentum, it said in a separate release today.

In China, a factory gauge rose less than economists forecast in September, signaling limits on the nation’s rebound from a two-quarter economic slowdown.

A separate Chinese manufacturing index from HSBC Holdings Plc and Markit published yesterday rose to 50.2 in September from 50.1 in August. The final number was less than the 51.2 preliminary reading.

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