After Nationwide released statistics revealing that in October house prices rose at a more rapid pace than anticipated the British Pound was able to advance on its American rival.
Sterling’s two-week high against the US Dollar may not last long however as the latest figures have shown that over the course of the past month the UK manufacturing sector contracted by more than expected.
In September the CIPS/Markit Purchasing Managers’ Index for the manufacturing sector stood at a downwardly revised 48.1. This number has now dropped to 47.5.
Octobers figure is 2.5 below the mark which separates growth from contraction and 0.5 lower than predicted by economists. This indicates that there continues to be significant underlying fragility in the UK economy.
Cost hikes and a reduction in orders are the main reasons cited by companies for this contraction. The PMI statistics showed that the demand for exports dimmed, leading to a steep decline in new orders (from 49.9 to 47.7) and manufacturers slashing production for a fourth consecutive month.
Rob Dobson, an economist with Markit, was quoted as saying: ‘While the road to an export-led recovery is still blocked by the ongoing difficulties in the Eurozone, it is concerning to hear further reports of the global slowdown hurting trade with other regions such as Asia.’
Dobson continued: ‘The consumer goods sector bounced back robustly in October to really buck the wider trend. This chimes with ongoing signs that domestic retail sales volumes are holding up reasonably well.’
Despite the positive signs many industry experts are cautioning that the stronger-than-forecast growth recorded for the third-quarter is unlikely to carry through to the fourth.
Some economists positively altered their outlook for the UK economy on the back of better-than-expected GDP for the third-quarter, and business lobby CBI also moderately raised its forecast.
Others however are urging caution and not dismissing the possibility of the Bank of England extending its present fiscal stimulus methods during next week’s policy meeting.
As of 11:25 am
The Pound to Euro exchange rate is currently trading at 1.2481
The Pound to US Dollar exchange rate is currently trading at 1.6161
The Pound to Australian Dollar exchange rate is currently trading at 1.5571
The Euro to US Dollar exchange rate is currently trading at 1.2948
The Euro to Pound exchange rate is currently trading at 0.8010
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