Interest rate rise on back burner after stall in factory output

Pressure for an imminent rise in interest rates has receded slightly with news that the UK’s manufacturing sector trod water last month with the first fall in jobs in Britain’s factories for more than two years.

The Markit/Cips Manufacturing survey declined from 51.9 in July to 51.5 in August and although any measure above 50 indicates growth that was seen by many economists as sluggish.

Samuel Tombs of Capital Economics said: “Sterling’s appreciation and the continued sluggishness of the euro-zone’s recovery suggest that a sustained revival in manufacturing will remain a distant prospect.”

Markit said any growth had been driven by domestic demand as exports were down for the fifth month in a row. Manufacturers also benefited from lower oil prices and the pound’s strength when buying raw materials.

Rob Dobson, an economist for the survey compilers Markit, said: “UK manufacturing remains in a holding pattern, with production hovering around stagnation.”