Activity in the UK manufacturing sector unexpectedly slowed in November. The factories in the UK are struggling to cope with rising prices due to the devalued currency that fails to promote exports as previous months. Purchasing Managers’ Index (PMI) dropped from 54.2 points in October to 53.4 points in November, according to the private company Markit together with the Institute CIPS. The expectations of analysts were for a rise to 54.5 points.
The authors of the report say that the manufacturing sector appears to contribute to economic growth in the fourth quarter, as there is a steady rate of expansion, which remains above average long-term trend.
The British economy is performing much better than expected after the Brexit referendum in the end of June. Greater test, however, will be next year when inflation is forecast to accelerate sharply, which in turn can harm the purchasing power of households.
The index of prices that companies pay for materials and energy, rose by an even faster pace in October, the prices of finished goods also straight monthly rise. The reason for rising prices, the Purchasing Managers identify weak currency. The British pound fell by about 19% against the US dollar since the referendum. The afraid is that higher costs sometimes overshadow the positive impact of the weaker exchange rate, especially when growth in export orders has slowed considerably after the five-year peak reached in September.
Almost all economists expect inflation to exceed the target of the Bank of England by 2% next year.
As regards employment in the manufacturing sector, it grows at a slightly slower pace than in October.
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