UK Manufacturing Growth Slows As Weaker Pound Drives Up Costs

British manufacturing sector expanded for the fourth straight month in November, but the pace of growth slowed unexpectedly, as a weaker currency drove up prices.

The Markit/CIPS Purchasing Managers' Index, or PMI, fell to 53.4 from 54.2 in October and September's 27-month high, survey results from IHS Markit showed Thursday. A reading above 50 suggests growth in the sector. Economists had forecast a higher score of 54.4.

"Although the recent growth spurt showed further signs of slowing, the pace of expansion is still solid and above its long-term trend," IHS Markit economist Rob Dobson said.

"This should be sufficient to ensure manufacturing is a positive contributor to fourth quarter GDP."

Solid expansions of production and incoming new orders continued in November with companies reporting that domestic and export demand both remained positive growth spurs. So did new product launches, sales initiatives and efforts to clear backlogs of work, the survey said.

The weak sterling exchange rate boosted export competitiveness, attracting more business from abroad, mainly the USA, mainland Europe and the Middle East.

Meanwhile, the weaker currency negatively impacted costs, driving average purchase prices at a pace close to October's near six-year record and again at one of the fastest rates in the survey history.

The survey showed that 84 percent made some reference to the weak exchange rate versus 90 percent in October, while offering reasons for the increase in costs.

As businesses passed on the increase in input costs to clients in the form of higher selling prices, output charges rose for the seventh successive month, with the rate of increase close to October's 64-month record.

"The concern is that higher costs may in time offset any positive effect of the weaker exchange rate, especially given that export order book growth has already waned markedly from September's five-and-a-half year high," Dobson said.

Manufacturing employment increased for the fourth straight month, albeit slower than in October with mid-size firms reporting the sharpest jobs growth.