UK manufacturing growth slowed more than expected in August to its weakest rate in five months as export orders fell in a sign that the pound's strength is starting to hurt.
The Chartered Institute of Purchasing and Supply/RBS Purchasing Managers' Index (PMI), which measures activity in the manufacturing sector, slipped to 53.1 last month from a downwardly revised 53.6 in July.
That was still above the 50 mark that divides expansion from contraction but below analysts' forecasts of a reading of 53.7 and could at the margin dent expectations of another Bank of England interest rate rise later this year.
Most economists do not expect the central bank to repeat August's quarter-point interest rate hike next week but expectations of a rate rise as early as November are rising, given a solid housing market and retail sales readings.
Those expectations have helped propel sterling to two-year highs in the last month, making it harder for British exporters to continue cashing in on an upturn in the euro zone, their biggest market.
The CIPS/RBS survey showed that export orders fell for the first time in seven months and at their fastest rate in more than a year, with the index falling to 48.3 from 53.9 in July. Total new orders were still growing last month but at their weakest pace in five months.
Weaker exports could have implications for projections of British economic growth, which has been robust so far this year.
Firms' costs and output prices are still rising sharply, although their pace of growth eased slightly in August from one and a half year highs hit in July.
Employment, meanwhile, dipped back into contraction in August after just two months of growth. The report said that while three quarters of firms reported no change in staffing levels, rising costs discouraged some firms from taking on new staff.
