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UK manufacturing rebounds from post-Brexit fall

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Manufacturers reported strong growth in export orders from the US, Europe, China and the Middle East, according to Markit/CIPS data

Manufacturing output surged in August, boosted by the post-Brexit vote collapse in sterling, according to the latest Purchasing Managers Index report from Markit/CIPS.

The PMI index - where the 50 mark separates contraction from growth - jumped from 48.2 in July to 53.3 in August. The growth was the joint greatest in the survey’s near 25-year history, Markit said.

Manufacturers reported strong growth in export orders from the US, Europe, China and the Middle East and the new orders index leapt from 47.8 to 54.6.

Markit reported that the depreciation of sterling since the June 23 EU referendum was "by far the main factor" cited by manufacturers as supporting the surge in new export work. The pound jumped 1% to €1.1890 against the euro.

However, input prices increased at the fastest rate in more than five years in August, according to the survey.

Employment rose for the first time during the year, but only moderately. Job creation was seen at small and medium sized companies, whereas cuts were made at largescale producers. Higher staffing levels aided efforts to reduce backlogs of work.

Rob Dobson, senior economist at IHS Markit, said: “The August PMI data indicate a solid rebound in the performance of the UK manufacturing sector from the steep downturn that followed the EU referendum.

“Companies reported that work that had been postponed during July had now been restarted, as manufacturers and their clients started to regain a sense of returning to business as usual.”

Dobson added: “Inflation is raising its ugly head, however. Rates of increase in input prices and output charges both hit five-year highs, which manufacturers placed squarely at the door of the cost impact of sterling on import prices.

“It is too early to say whether the rebounds in growth and inflation will be sustained, but the upturn in August suggests that the weaker exchange rate and recent policy action have helped to avert a downturn.”

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