U.K. Manufacturing Growth Cools to Four-Month Low as Costs Rise

  • Pound depreciation both boosting exports and input costs
  • Selling prices remain near their highest level since 2011
Photographer: Simon Dawson/Bloomberg

U.K. manufacturing expanded less than economists forecast in November and inflationary pressures continued to build.

IHS Markit said Thursday that its Purchasing Managers Index dipped to a four-month low of 53.4 from 54.2 in October, remaining above the 50-mark dividing expansion from contraction. Economists had forecast a reading of 54.4. Measures of new orders declined on the month.

The pound’s decline since the U.K. voted in June to leave the EU is benefiting manufacturing, which will probably make a positive contribution to growth this quarter, Markit said. Nevertheless, the currency’s weakness is proving to be a double-edged sword, with firms reporting that they had to increase prices as their input costs surged.

“The concern is that higher costs may in time offset any positive effect of the weaker exchange rate, especially given that export order book growth has already waned,” said Rob Dobson, an economist at Markit in London.

Selling prices stayed close to their level last month, which was the highest since 2011. The weak exchange rate helped boost competitiveness and demand from the U.S., Europe and the Middle East.

According to a survey from the Confederation of British Industry published last week, expectations for selling-price inflation in manufacturing have surged to the highest since 2014.

Before it's here, it's on the Bloomberg Terminal.