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GBP/USD Forecast: Optimism in The Economic Data

The manufacturing sector in the UK recorded strong growth in June, but the growth rate stalled just below the record, the final results of the IHS Markit survey showed on Thursday.

The Chartered Institute of Procurement and Supply Manufacturing Manager index fell slightly to 63.9 in June from a record 65.6 in May. The reading was below the forecast of 64.2.

The indicator remained above the line at 50.0 for 13 consecutive months, signaling growth in the manufacturing sector. Production rose in June in the consumer, semi-finished, and capital goods industries. Growth was supported by strong new business inputs, which rose to about record highs in May. New export orders increased again, reflecting the influx of new business from continental Europe, the US, and Asia.

Employment advanced at a rate close to a record high in May. Nearly 63 percent of companies expect production to increase over the next year, indicating reduced uncertainty over COVID-19 and Brexit and improved conditions in the global world market.

The data showed that the industry continued to be affected by supply chain and distribution difficulties, leading to longer delivery times and disruptions in production schedules. Average input costs grew at the fastest rate in the history of the survey. The passage of higher input costs has led to the fastest growth in sales prices since fee data were first collected in November 1999.

The further inflationary impact of the capacity problem of both producers and their suppliers will continue to be an important factor that will keep headline inflation above the Bank of England’s 2% target in the coming months, said Rob Dobson, director of IHS Markit. He added: Strong production growth, new orders, and employment continues, UK production maintained an almost record pace of expansion at the end of the second quarter as the reopening of economies both at home and abroad supported increased production, new orders, and employment. Strong business confidence and a growing number of ancillary jobs also suggest that the current rise must continue.

GBP/USD Forecast: Optimism in The Economic Data However, the manufacturing sector is still declining with growing inflationary pressures as Brexit-related trade issues have exacerbated delays in the global supply chain. The resulting widespread shortage of raw materials led to the largest increase in purchase prices, which led to a rapid increase in sales prices. There are also widespread reports of supply problems that cause disruptions in production schedules and interfere with the normal construction of stocks to meet market needs.

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