U.K. Factory Growth Weakens as Euro-Area Slump Curbs Demand

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By Jennifer Ryan

U.K. manufacturing grew at the slowest pace in 17 months in September as growth in new orders almost stalled.

Markit Economics said its Purchasing Managers’ Index fell to 51.6 from 52.2 in August, the lowest since April 2013. A measure of new orders dropped to a 19-month low of 50.5, close to the 50 level that divides expansion from contraction. The export orders index also dropped.

Markit blamed the weakness in overseas demand on the “on-going lethargy of the euro zone,” and said the surge in U.K. manufacturing earlier this year “appears to have run its course.” The report indicates weakness in some parts of the economy in the third quarter after expansion of 0.9 percent in the three months through June.

Sterling extended its decline against the dollar after the survey was released and was down 0.3 percent at $1.6166 as of 9:32 a.m. London time.

Bank of England officials have split on interest rates for the past two months, with a minority voting to raise borrowing costs from a record-low 0.5 percent. The risks from Europe may reinforce the view among the majority that it’s not yet time to begin tightening policy.

The median estimate in a Bloomberg survey of economists was for the factory index to rise to 52.7 in September from an initially reported 52.5 in August. The PMI survey showed that output-price inflation at factories eased for a second month in September, with the index dropping to a 15-month low. Input prices fell for the first time in five months.

The report will “add to the air of caution as to whether the economy is ready for higher interest rates,” said Rob Dobson, an economist at Markit in London. “The picture of waning inflationary pressures painted by industry may provide some leeway for the Bank of England to hold off from raising rates even if strong growth persists.”

To contact the reporter on this story: Jennifer Ryan in London at [email protected]

To contact the editor responsible for this story: Fergal O’Brien at [email protected]

 

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