UK manufacturing grows as export orders climb to near record

London - UK manufacturing growth accelerated for the first time in three months in July, bolstered by the strongest jump in export orders in seven years.

A measure of factory output rose to 55.1 from a revised 54.2 in June, according to IHS Markit’s Purchasing Managers’ Index. That exceeds the advance to 54.5 forecast by economists in a Bloomberg survey and is well above the 50 level dividing expansion from contraction.

Companies reported that export orders, which climbed to the second-highest reading since records began in 1992, were boosted by the pound exchange rate as well as stronger economic growth in the euro area, North America and Asia-Pacific regions. The domestic market also contributed to order books, albeit at a weaker level than earlier in the year.

Firms were assisted by easing price pressures, with input costs rising at the slowest pace in over a year. The report suggests that the inflation effect of the pound’s drop, triggered by the vote to leave the European Union last year, is starting to fade.

That may help take the strain off Bank of England policy makers, who meet this week to decide how to respond to above-target price gains. The Monetary Policy Committee, which voted 5-3 against raising interest rates in June, will announce their decision on August 3.

“If this trend of milder price pressures is also reflected in other areas of the UK economy, this should provide the Bank of England sufficient leeway to maintain its current supportive stance until the medium-term outlook for economic growth becomes less uncertain,” said Rob Dobson, senior economist at IHS Markit.

Manufacturing accounts for about a 10th of the UK economy. PMI data on services, which make up almost 80 percent, will be published on Thursday.

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