The Purchasing Managers’ Index, Markit’s monthly economic surveys, has risen to 53.3 for August 2016. This figure represents a 5 point jump from 48.2, the joint-greatest increase in the 25 years that the reports have been running.
The index uses 50 as the boundary between contraction (below 50) and growth (above 50).
Image via The Independent
Markit added to the report that “by far the main factor” in the growth was the depreciation of sterling following the result of the EU referendum in June.
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.
Rob Dobson of IHS Markit.
Some analysts have commented that the 5 point increase meant a lesser likelihood of a UK recession for the second half of the year, however Lee Hopley of the EEF manufacturers’ organisation remains cautious:
Today’s data provides a lot of relief that manufacturing activity is still on the up. But the heightened volatility in the indicator in the last couple of months still raises questions about whether sentiment has overshot somewhat and, rather than this pace of expansion being sustained, some moderation is likely in the coming months.
According to the latest GDP estimate from the ONS, manufacturing output surged by 1.8 percent in the second quarter of the year, the period directly before the referendum.
Manufacturing employment rose for the first time this year, although modestly, according to the survey.