UK factories boom as pound's Brexit plunge boosts exports

[LONDON] UK factories had their best month in more than two years in September as the weaker pound sent export orders surging.

IHS Markit's monthly Purchasing Managers Index jumped to 55.4 from 53.4 in August, capping the industry's best quarter this year. That was the highest reading since June 2014 and far exceeded economists' forecast for 52.1.

Export orders increased the most since Jan 2014 in September, and Markit said manufacturing probably helped to lift GDP in the three months.

The report shows how sterling's 13 per cent depreciation since the Brexit vote in June is supporting manufacturing amid uncertainty about the UK's new trading relationship with the European Union. It also adds to evidence that the economy is weathering the fallout from the referendum better than some had anticipated.

"The weak sterling exchange rate remained the prime growth engine, driving higher new orders from Asia, Europe, the US and a number of emerging markets," said Rob Dobson, senior economist at Markit.

He added that an improvement in both new business and output in investment goods sector may be a "sign that capital spending is recovering from its early year lull, in the short term at least".

The weaker currency is also pushing up import costs, and the report showed both input and export costs rising strongly in September.

BLOOMBERG