U.K. Manufacturing Cools as Strong Pound Damps Export Orders

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U.K. manufacturing growth cooled in August as export orders fell for a fifth month.

In its monthly factory report published in London, Markit Economics said companies blamed the decline in foreign demand on the strong pound, weak sales in the euro area and China’s economic slowdown. The headline manufacturing index slipped to 51.5 from 51.9 in July. A reading above 50 indicates growth.

The report highlights a potential risk to Britain’s economy after net trade boosted growth by the most in four years in the second quarter. While Bank of England Governor Mark Carney has said the time for an interest-rate increase is approaching, he’s also warned of external risks.

The pound erased gains after the data and was little changed at $1.5341 as of 10:11 a.m. in London, after increasing as much as 0.4 percent before the release.

“Export-order volumes continue to disappoint,” said Rob Dobson, a senior economist at Markit. “Given that China makes up only a small proportion of U.K. exports, the direct impact of a slowing in that nation is likely to be minimal. However, it is too early to say what the indirect impact may be if there is any knock-on effect for broader global economic growth.”

The Markit report also showed that employment fell for the first time in more than two years, albeit marginally, and a slump in input prices intensified.

(Updates with pound in fourth paragraph.)

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