It seems that some British manufacturers have continued to stockpile during the month of September as they gear up for the October 31st Brexit deadline. The UK Manufacturing Purchasing Managers’ Index shows that the factory sector in the UK overall shrank for the 5th month in a row, its longest run since Mid-2009.
Manufacturing PMI is a leading indicator of economic health. A reading above 50 indicates industry expansion, below 50 indicates contraction in the sector. Although todays reading has come in below 50, the pace at which the sector is contracting eased. Showing a four-month high of 48.3, helped by some companies accumulating stocks and buying more inputs for the first time in recent months.
Manufacturing accounts for around 10% of Britain’s economy. A PMI survey for the bigger services sector is due to be published on Thursday. As this accounts for a larger percentage of the UK’s economy any change in the forecasted reading could cause some volatility for Sterling crosses.
The Eurozone also published their Manufacturing PMI figures with most showing further signs of sector contraction. Germany’s manufacturing recession continues to deepen in September with factories recording their weakest performance since the world financial crisis a decade ago.
Germany’s export-reliant manufacturers are suffering from a slowing world economy and business uncertainty linked to a trade dispute between the United States and China as well as Britain’s planned but delayed exit from the European Union.