Pound Drops After Manufacturing Activity in the UK Fell Off Its High Last December

By Siyuwj [CC BY-SA 3.0] via Wikimedia Commons

This morning, the pound weakened against the dollar following a revelation of a closely-watched index that the manufacturing index of the United Kingdom missed expectations last December.

Sterling fell 0.2 percent against the US dollar to $1.1214 after the purchasing managers’ index (PMI) of IHS Markit for the manufacturing industry dropped to 56.3 last December, a decline from 58.2 in November, the highest that was recorded since 2013.

Even though the figure was still well more than 50, the no-change mark above which shows the growth in the sector, it was below the expectations of economists of 58.

The research suggested that the effect of inflation eased last December as increases in input costs decreased to a four-month low. However, it warned that the cost increases “remained marked overall.”

The director at IHS Markit, Rob Dobson, stated: “Although still running at elevated levels, this at least provides signs that the recent surge in price inflation is starting to abate.

“This trend should continue at the start of 2018, as supply-chain pressures hopefully ease further.”

The UK head of manufacturing at Lloyds Bank Commercial Banking, Dave Atkinson, suggested that the strength of the sector was starting to shine through.

He said: “Concerns that businesses were driving exports largely as a result of the weakened pound are abating, with evidence of lasting relationships with new supply chains abroad, showcasing the full potential of the UK’s manufacturing capabilities.

“With EU trade talks set to begin this year, it brings with it the prospect of greater clarity for the UK’s future trading relationships with key export markets.

“Although headwinds remain in the form of persistently high inflation, pushing up the price of materials, along with reports of relatively weak consumer demand, this reading nevertheless suggests the sector is well-set for growth this year.”