(Bloomberg) -- U.K. manufacturers are continuing to benefit as the pound's depreciation helps exports, though many are also taking a cost hit from the currency.
IHS Markit's Purchasing Managers Index showed that export orders rose at a “robust” pace in October, with increased sales to the European Union, the U.S. and China. Measures of input and output prices surged to the highest in more than five years.
Sterling has dropped 18 percent since the U.K. voted in June to leave the EU, and the survey results show the double-edged impact of the currency's weakness. Around 90 percent of companies offering a reason for higher costs made some reference to the exchange rate.
“On the positive side, the boost to competitiveness drove new export order inflows higher, providing a key support to output volumes,” said Rob Dobson, an economist at Markit. “The downside of the weaker currency is becoming increasingly evident, however.”
The increase in purchasing costs was one of the steepest in the PMI's near 25-year history.
The headline factory gauge was at 54.3 last month, down from a two-year high of 55.5 in September, but still well above the key 50 line that divides growth from contraction. Dobson said that puts manufacturing back on a “firm footing” after its sharp contraction in the third quarter.
He also said that if solid expansion and rising price pressures are seen in other parts of the economy, the odds of another Bank of England interest-rate cut this year are “virtually nil.”
--With assistance from Mark Evans
To contact the reporter on this story: Fergal O'Brien in London at fobrien@bloomberg.net.
To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Craig Stirling at cstirling1@bloomberg.net.
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