The Purchasing Managers’ Index jumped to 53.3, helped by the slump in sterling in wake of referendum vote.
Manufacturing output unexpectedly surged in August according to the latest Purchasing Managers’ Index report from Markit/CIPS, helped by the post-Brexit vote collapse in sterling.
The index – where the 50 mark separates contraction from growth – jumped from 48.2 in July to 53.3 in August.
The monthly surge of 5 points was the joint greatest in the 25 year history of the survey, Markit said.
Export orders from the US, Europe, China and the Middle East rose strongly and the new orders index leapt from 47.8 to 54.6.
Markit reported that the depreciation of sterling since the June EU referendum was “by far the main factor” cited by manufacturers as supporting the surge in new export work.
City of London analysts had expected a manufacturing PMI reading of just 49 for August and the postive news instantly sent sterling up more than a cent against the dollar to $1.3240.
Against the euro the pound jumped 1 per cent to €1.1890.
The pound fell more than 10 per cent against the dollar and the euro in the wake of the vote, hitting its lowest level in 31 years against the US currency.
“It is too early to say whether the rebounds in growth and inflation will be sustained, but the upturn in August suggests that the weaker exchange rate and recent policy action have helped to avert a downturn,” said Rob Dobson of IHS Markit.
Manufacturing accounts for around 10 per cent of the UK economy and some analysts said the reading reduced the likelihood of a recession for the UK in the second half of the year.
“The latest survey evidence supports our view that the economy is set for a period of slower growth, rather than a full-blown recession in the near term,” said Paul Hollingsworth of Capital Economics.