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Instant View - UK manufacturing orders at near 20-year high in August: PMI

LONDON (Reuters) - British manufacturing accelerated again in August as new orders and output hit their highest levels in nearly 20 years, boosting hopes that the country's recovery is broadening, a survey showed on Monday.



"It's very encouraging. The recovery is continuing, and it's broad-based. It's not just services - manufacturing is feeling it, construction is feeling it, and this bodes well for the second half of the year. We had some impressive Q2 GDP data, Q3 may be even stronger.

"The rise in yields is not killing off the recovery, so for the Bank of England this week it means steady as she goes."


"Moving forward, manufacturers will be hoping that the recent extended good news on the UK economy further lifts business and consumer confidence which in turn translates into sustained higher demand for capital goods and consumer durable goods. Encouragingly, there is evidence in recent surveys that businesses are now lifting their investment plans (the August quarterly survey from EEF shows that the balance of manufacturers planning to raise capital investment is now at a six-year high) while consumers' opinion of the climate for making major purchases is reported to have risen appreciably in August according to the latest GfK/NOP survey."


"We still worry that the recovery will lose some pace, insofar as it has partly reflected unsustainably strong growth in domestic household spending. Indeed, note that the CIPS survey's export orders balance has barely risen over the last few months. But for now at least, the manufacturing sector appears to be enjoying a healthy bounce-back."


"It was fairly strong. With PMIs, you always have to be a little bit careful in interpreting them. What this number shows is that we're coming from a very depressed situation indeed and to one that is rather brighter.

"But I don't think we should necessarily equate the index level with any growth rate in manufacturing. It would tend to point to a fairly broadly-based improvement, but not necessarily one that's going to give us a bumper GDP data.

"I don't think (the BoE) is going to tighten policy, and that would be the logical message to take away from the number. As for giving more stimulus, well that seems much less likely now."


"These are almost unprecedented numbers. We have been at these levels before, but never sustained them. It's hard to take this even remotely literally. I don't think the sector is growing at a 4 or 5 percent annual rate. But there must be a large number of respondents saying things are getting at least a bit better, so it just suggests we could see an acceleration of third-quarter GDP growth."


"The UK's factories are booming again. Orders and output are growing at the fastest rates for almost 20 years, as rising demand from domestic customers is being accompanied by a return to growth of our largest trading partner, the euro zone.

"The sector therefore continues to build on the solid 0.7 percent expansion registered during the second quarter, and growth could easily break the 1.0 percent mark in the third quarter. Manufacturing is clearly making a strong positive contribution to the economy, providing welcome evidence that the long-awaited rebalancing of the economy towards manufacturing and exports is at last starting to take place now that our export markets are recovering.

"Looking at the broader economic picture, the new forward guidance provided by the Bank of England places greater emphasis on job creation alongside economic growth and price inflation. While the latest PMI suggests that the output side is increasingly positive, the news on the other fronts is much less so. Employee numbers crept up only slightly, as companies squeezed extra output from existing resources. At the same time, the rate of input cost inflation surged upwards on the back of rising oil and related prices."