Sterling fell sharply against the US Dollar and Euro this morning after UK manufacturing PMI data came in much worse than expected, with the lowest reading since September 2009.
The Markit/CIPS manufacturing PMI index declined to 52.1 in May from a downwardly revised 54.4 in April, well below expectations of 54.1.
The slowest growth in manufacturing activity in twenty months blamed on a generally weaker British economy, particularly a slowdown in export orders as well as reduced activity in the consumer goods market.
“The UK PMI suggests that manufacturing has moved from rapid expansion to near-stagnation,” said Rob Dobson, senior economist at survey compiler Markit. “Domestic market weakness was the main drag on order books and output.”
The slowdown hit consumer goods producers and smaller manufacturers the hardest, and there was disruption to supply chains from Japan’s earthquake and tsunami, Dobson added.
Sluggish growth in the first quarter fuelled speculation that an interest hike by the Bank of England will be unlikely before the end of the year in order for the recovery to gather pace.
The Pound fell around 80 pips against the US Dollar to $1.6401 from pre-news levels of 1.6480 within 5 minutes. The Euro jumped around 40 pips to 0.8794 from 0.8754.