KPMG Bemoans Strength of Pound / Euro Rate

The July release of the Markit/CIPS UK Manufacturing PMI reported a slowdown in growth for the month of June.

The number represents the lowest growth since early 2013 and KPMG’s UK Head of Industrial Manufacturing, Stephen Cooper, is all too keen to point the finger of blame at the strength of the British pound:

“This slowdown in UK manufacturing growth is disappointing, considering the recent steady improvements in previous months of this year. The strengthening of the pound relative to the Euro, while good for summer holiday travellers, will not be good for UK manufacturers as it makes UK manufactured goods more expensive for those who import them. As 40 per cent of UK exports are still exported to the Eurozone, any disturbance downwards in that market will impact negatively on UK manufacturing.”

Interestingly the Eurozone has shown positive results in the past month where growth was registered in all countries except Greece.

The improvement in Eurozone data has helped keep a lid on the rise in the pound to euro exchange rate, indeed we note that it appears unable to break above the 1.41 resistance zone.

This may however change in next month’s Eurozone PMI if the uncertainty in the Eurozone with the current unresolved Greek debt issue continues.

“The largest global manufacturing countries of China and the USA have also shown a continued contraction in manufacturing over recent months due to weaker export demand for both countries goods. This, combined with the Eurozone issue, does not give a good signal for the coming months for global manufacturing, and UK manufactures will be watching events closely,” says Cooper.