The latest figures from Markit/CIPS have shown that although UK manufacturing contracted in April, it took a big step closer to the 50 mark which separates growth from contraction.
The Pound Sterling Exchange Rate was in the region of 1.5582 against the US Dollar as of 10:10 am GMT
Although economists expected UK manufacturing PMI to come in at 48.5 the index actually rose to 49.8 in April.
March’s figure was also upwardly revised to 48.6.
Manufacturing accounts for over 10 per cent of the economy’s overall growth, and improvement in the sector could lend support to other key sectors of the economy, such as services.
This latest positive result follows last week’s stronger-than-expected GDP and yesterday’s increase in home loans.
In a statement accompanying the data senior Markit economist Rob Dobson asserted: ‘Following the poor start to the year, when manufacturing acted as a drag on the economy in the opening quarter, it is welcome to see the sector showing signs of stabilising in April. With forward looking indicators such as new orders and the demand-to-inventory ratio also ticking higher, the sector should at least be less of a drag on broader GDP growth in the second quarter.’
Dobson continued: ‘Manufacturers report that the domestic market is just about holding its head above water, but was still a key cause of disappointingly weak demand, while a solid improvement in new export orders was the real surprise. Companies made further strides into selling to faster growth markets such as Latin America and the Middle East, as well as success in traditional targets like North America and Australia. This helped offset the ongoing drag on export performance from our largest trading partner, the euro area.’
It was also intimated in the accompanying statement that the additional easing in price pressures seen in April could provide the Bank of England with more scope for extending its current policy methods if necessary.
Although David Nobel of the Chartered Institute of Purchasing and Supply was more cautious in his assessment of the situation, he too intimated that it could signal brighter economic times ahead.
Nobel stated: ‘We should not forget that the sector is not in rude health. A weak Q1 has led to continued job losses in April reminding us that the tough times will undoubtedly continue. Businesses remain cost cautious, but the latest figures are at least a chink of light in the tunnel.’
After the report was published the Pound strengthened to 1.5583 against the US Dollar.
The Pound also gained modestly on the Euro.
Significant market movement is likely to occur following the highly anticipated FOMC and ECB policy meetings. Both central banks will issue their rate announcements tomorrow.
Current Pound Sterling (GBP) Exchange Rates
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The Pound Sterling/US Dollar Exchange Rate is currently in the region of: 1.5582 >
The Pound Sterling/Euro Exchange Rate is currently in the region of: 1.1815 >
The Pound Sterling/Australian Dollar Exchange Rate is currently in the region of: 1.5053 >
The Pound Sterling/New Zealand Dollar Exchange Rate is currently in the region of: 1.8149 >
The US Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.6419 <
The Euro/Pound Sterling Exchange Rate is currently in the region of: 0.8463 <
The Australian Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.6666 <
The New Zealand Dollar/Pound Sterling Exchange Rate is currently in the region of: 0.5518 >
(As of 10:10 am GMT)
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