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Sterling drops as manufacturing slows

British Sterling has fallen sharply against the US dollar after growth in manufacturing sector fell markedly in April.

Markit a financial data company,  said its monthly Purchasing Managers’ Index (PMI) for manufacturing fell from 54 in March to 51.9 in April.

Although a figure more than 50 still indicates expansion, the fall is the biggest since February 2013.

The pound is down more than 2 cents, or 1.4%, to $1.5139.

Sterling also dropped against the euro to €1.352.

Companies complained the strength of the pound with the euro was affecting competitiveness in the eurozone.

The Markit survey came after the release of official figures on Tuesday that showed the UK’s economic growth rate halved to 0.3% in the first quarter of 2015.

A senior economist at Markit, Rob Dobson, said: “Today’s UK PMI delivered less-than-positive news on the health of the manufacturing sector.

“Any signs of rebalancing the economy towards manufacturing and exports remain frustratingly elusive.”

Survey hits sterling

The survey revealed that new export orders fell at the quickess rate since January 2013, job creation was “modest”, and manufacturers reduced prices at their fastest rate in almost six years.

In recent months, the pound has increased in value against the euro. In March, it was at its highest level compared with the single currency in 7 years, making UK goods being more expensive in the eurozone.

During the same period, sterling has dropped against the dollar, and the survey said prices paid for goods priced in dollars had increased.

David Tinsley, an economist at UBS, said: “The source of the drop [in the PMI] may be an indicator that the appreciation of sterling against the euro is having an impact on UK manufacturing competitiveness.

“One would hope that as the upswing in the eurozone gains traction demand may begin to compensate for the currency move, but it’s a reminder that monetary policy will need to be sensitive to the pound.”

However, chief economist at EEF, the manufacturers’ organisation, Lee Hopley, said: “It would be premature to write off manufacturing’s contribution to growth in the future, not least because continued employment growth points to some confidence about longer-term prospects.”

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