Weak pound boosts UK manufacturing but import costs rise steeply

PMI survey reveals manufacturers raised prices of goods at the fastest rate for five years and suggests higher inflation is on way. Expansion in British factories slowed a little in October as the weak pound boosted exports but also pushed the prices of imports sharply higher.

In the latest sign that consumers in the UK will face higher prices following the sharp fall in the value of the pound since the Brexit vote, manufacturers raised the price of their goods at the fastest rate in more than five years.

The latest Markit/CIPS manufacturing PMI (purchasing managers’ index) survey suggested that firms are starting to pass on higher import costs as the weak pound makes raw materials such as oil more expensive.

However, the weak exchange rate also helped to boost orders from the US, the EU and China.

The broader survey suggested the sector got off to a decent start in the fourth quarter. The headline index combining output, orders, and employment fell to 54.3 in October, from 55.5 in September, where anything above 50 signals expansion.

Rob Dobson, senior economist at IHS Markit, and an author of the report, said the manufacturing sector should return to growth in the fourth quarter, after shrinking by 1% in the third.