LONDON (Reuters) – British manufacturing grew at the slowest rate in 17 months in September as demand weakened at home and in Europe, a slowdown likely to be noticed by the Bank of England as it debates when to start raising interest rates.
The Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) released on Wednesday fell to 51.6, its lowest level since April last year and below a consensus forecast of 52.5 in a Reuters poll of economists.
August’s reading was revised down to 52.2 from a previous estimate of 52.5, Markit said.
Growth in new orders slowed for a third straight month in September, all but grinding to a halt partly due to the strength of sterling and weak demand in Europe.
“The weakening of the manufacturing PMI data in August was cited as a major concern among the Bank of England’s Monetary Policy Committee,” Markit senior economist Rob Dobson said.
“September’s disappointing reading will therefore add to the air of caution as to whether the economy is ready for higher interest rates.”
The BoE was also likely to note the lack of price pressure among manufacturers.
The PMI survey showed the weakest growth in output prices in 15 months, reflecting lower raw material costs and stronger competition, while input prices fell for the first time in five months, again on the back of lower commodity prices and a stronger pound against the euro.
Britain’s factories hired at a faster rate again after taking on staff more slowly in August, although hiring remained below the kind of pace seen at the start of the year.
A similar survey for Britain’s dominant services sector is due to be published on Thursday, giving a bigger steer for how the economy fared at the end of the third quarter.