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British manufacturing benefits from cheaper currency

British manufacturing benefits from cheaper currency, as export orders reached its highest level in two years. The index of foreign demand increased to -6 percentage points this month, according to a survey of the Confederation of British Industry (CBI). This means that 21% of companies reported export orders above normal, while orders to 27% of the companies are below normal. Thus, the difference becomes -6 percentage points.

The single indicator for orders is generally -5 percentage points, while during the last month its value was -4 points. Although there is a decrease, the result is a pleasant surprise because expectations were for value of -9 percentage points. According to the economists the result is wobbly signal that the weakening of the currency begins to reflect.

The Brexit referendum in end of June lead to collapse of the GBP to 30-year low, which might support the exports. Before that, the net trade outweigh the economy because of weak global demand and the strong currency.

The Confederation of British Industry also stressed the negative sides of weaker currency, which lead to higher prices. The surveyed companies expect prices to rise at the fastest pace since the start of 2015, possibly because of increased import prices.

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