Investing.com - Manufacturing activity in the U.K. surprisingly jumped back into expansionary territory in August from what had been its worst level since early 2013 in the prior month, industry data showed on Thursday.
In a report, market research group Markit said that its U.K. manufacturing PMI rose to a seasonally adjusted 53.3 last month from a reading of 48.2 in July.
That was a 10-month high and the month-on-month increase in the level of the headline PMI (5.0 points) was the joint-greatest in the near 25-year survey history.
Analysts had expected the index to rise to only 49.0 in August.
On the index, a reading above 50.0 indicates industry expansion, below indicates contraction.
Markit indicated that the data showed solid rebounds in the trends in U.K. manufacturing output and incoming new orders, while a weaker pound drove up export orders and input costs.
Employment also rose for the first time in 2016.
“The August PMI data indicate a solid rebound in the performance of the UK manufacturing sector from the steep downturn that followed the EU referendum,” Rob Dobson, senior economist at survey compiler Markit, said.
“Companies reported that work that had been postponed during July had now been restarted, as manufacturers and their clients started to regain a sense of returning to business as usual,” Dobson added.
However, Dobson warned that inflation was “raising its ugly head” as increases in input prices and output charges both hit five-year highs.
In a cautious stance, he added that it was too early to know if the rebounds in growth and inflation will be sustained, but concluded that the August data suggested that recent policy action appeared to have helped avert a downturn.
After the report, cable hit intraday highs. GBP/USD was trading at 1.3242 from around 1.3139 ahead of the release of the data, EUR/GBP was at 0.8411, compared to 0.8473 prior to the report and GBP/JPY traded at 137.20 compared to 136.12 earlier.
Meanwhile, European stock markets were trading higher. London’s FTSE 100 rose 0.22%, the Euro Stoxx 50 gained 0.58%, France's CAC 40 advanced 0.93%, while Germany's DAX traded up 0.50%.