U.K. Manufacturing Growth Picked Up Before Brexit ReferendumJill Ward
U.K. manufacturing picked up speed in June and was growing at its fastest pace in five months before the country’s European Union referendum.
A Purchasing Managers’ Index rose to 52.1 from an upwardly revised 50.4 in May, Markit Economics said Friday in London. Almost all survey responses were received before the end of June 23, the day of the EU membership vote. Economists had forecast the gauge to remain unchanged at 50.1.
While any fallout from the Brexit vote won’t show up in hard data for some time, Bank of England Governor Mark Carney said Thursday that the outlook has deteriorated and policy easing may be needed within months. “Uncertainty could remain elevated for some time,” Carney said.
U.K. Prime Minister David Cameron resigned in the wake of the vote and the Conservative Party has yet to elect his replacement, meaning the U.K.’s exit strategy from the bloc -- and its full economic consequences -- may not be known for months to come. Nearly three quarters of economists surveyed by Bloomberg expect the U.K. to enter recession.
“Whether this growth recovery can be sustained will depend heavily on whether the current financial and political volatility spills over to the real economy,” said Rob Dobson, an economist at Markit. “There’s a clear risk that ongoing uncertainty will have at least some short-term impact.”
Not everything was going perfectly for manufacturing before the vote; June saw job losses in the sector for the sixth consecutive month.
New orders rose at the fastest pace since October, reflecting strength in the domestic market and a small increase in new export business, Markit said.
The pound’s decline since the U.K.’s vote to leave might make it easier for manufacturers to export, as they have been crippled for years by the strength of the currency. On the other hand, trading terms with the EU, Britain’s largest trading partner, may be less favorable in the long term.
“The big question is whether any negative impact from uncertainty can be partly offset by a boost to exports resulting from the fall in the pound,” Dobson said.