The pound fell to a near seven-month low against the dollar yesterday as weak manufacturing data added to recession fears.
Sterling shed around a cent versus the greenback, dropping close to $1.21, as surveys showed Britain’s factories lagging behind America’s industrial recovery.
The eurozone’s manufacturing sector was in even worse shape, leaving the single currency also struggling against the dollar.
In Britain, the S&P Global/CIPS manufacturing purchasing managers’ index (PMI) posted a reading of 44.3 for September – where the 50-mark separates growth from contraction.
That was an improvement on August’s 39-month low of 43.0 but still suggests the sector is shrinking.
Manufacturing slump: The pound shed around a cent versus the greenback, dropping close to $1.21, as surveys showed Britain’s factories lagging behind America’s industrial recovery
Output, new orders and jobs were all cut back further as demand from both UK and overseas clients weakened, the report found.
Rob Dobson, director at data provider S&P Global Market Intelligence, said: ‘September saw the manufacturing sector still mired in contraction territory, as weak conditions at home and abroad hit new order intakes and led to a further scaling back of production volumes.
The cost-of-living crisis and recent rapid rise in interest rates are taking their toll, according to producers, raising the possibility of the broader UK economy slipping back into contraction during the second half of the year.’
Signs of a wider slowdown were among factors cited by the Bank of England when it chose last month to stop increasing interest rates after 14 successive hikes.
But the higher rates will continue to squeeze household and business borrowers.
In Europe, the monthly manufacturing PMI reading dipped to 43.4 in September, down from 43.5 in August.
‘In the race to the bottom, France and Germany are leading the way,’ said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.
In the US, factories posted a higher than expected reading of 49.0 – still pointing to contraction but up from 47.6, and the highest level since November last year, suggesting it was heading for recovery quicker than counterparts in Britain and Europe.
‘US manufacturing appears to be over the worst but the outlook remains muted,’ said Paul Ashworth, chief North America economist at Capital Economics.
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