UK manufacturing sector returns to growth despite budget uncertainty
Happier news: The UK’s factory sector returned to growth last month for the first time in over a year.
The latest poll of UK purchasing managers across manufacturers shows that output across the sector rose last month, and that business optimism hit a nine-month high.
This pushed up the S&P Global UK Manufacturing Purchasing Managers’ Index (PMI) to a 14-month high of 50.2 in November, up from 49.7 in October. This is the first time since September 2024 that the PMI, which tracks activity in the sector, has come in above the 50-point mark that shows stagnation.
Rob Dobson, director at S&P Global Market Intelligence, says:
The numbers are especially encouraging as this improvement occurred despite November seeing elevated levels of business uncertainty, and in some cases an element of gloom, ahead of the Autumn Budget. “The lifting of this uncertainty caused by the long lead-in to the Chancellor’s budget announcement should hopefully provide a boost in December, but it will be interesting to see the extent to which business might react to the absence of any significant growth-promoting measures. After all, despite the improvement in the performance of the manufacturing sector, any growth is still worryingly weak.
Rising competitive pressures and slower cost inflation meanwhile led to factory gate prices being cut for the first time in over two years. This combination of soft industrial performance and subsiding price pressures will add to the shift in policy debate away from inflation fears towards supporting economic growth.”
Key events
Silver at record high
With the markets jittery, the price of silver has hit a new record high.
Silver rose over $57 per ounce for the first time ever this morning,
As well as being used as a store of value, silver also has industrial uses due to its high thermal conductivity and a relatively higher electrical conductivity.
AJ Bell investment director Russ Mould flags that rumours that a trader may have been caught short of silver after betting against the metal, saying:
“Silver is up by nearly 7% from Friday, which saw a truncated session in the USA, thanks to the reported power outage at a data centre operated by the CME. This confluence of events is prompting much chatter on social media about whether this really was an outage or a convenient break in trading on a day when liquidity and volumes were likely to be light across most markets and asset classes, thanks to the Thanksgiving holiday weekend in America.
“If someone really is short silver and struggling to find physical product for delivery to meet contracts, then this should show up pretty quickly in the inventory levels held across COMEX-approved warehouses, such as those managed by JPMorgan Chase, HSBC, and Loomis International, among others.
“As of Friday, COMEX was showing stocks of 456.8 million ounces of silver, a high number by historic standards, based on data that goes back to 2002.
US dollar weakening
Elsewhere in the markets, the dollar is weakening as investor anticipate cuts to US interest rates.
The dollar index has dipped by 0.35% today, with the pound now up 0.2% against the greenback at $1.326.
Investors are increasingly confident that the Federal Reserve will ease policy this month – a quarter-point rate cut is now seen as an 87% chance.
And looking further ahead, speculation is growing that White House economic adviser Kevin Hassett will become the next Fed chair. Hassett, a Trump loyalist, would presumably be inclined to interest rate cuts which could undermine the dollar…..
Airbus shares down 6% on fuselage panel problem
Airbus’s shares are on track for their worst day in eight months, as it confirms that it has (as flagged earlier) found a problem with fuselage panels on its A320 planes.
Airbus has confirmed “a quality issue affecting a limited number of A320 metal panels”, Reuters reports.
The company says it is taking “a conservative approach” and inspecting all aircraft potentially impacted, even though only a portion of them will need further action to be taken.
Shares in Airbus are currently down 6.5%, which would be their worst biggest fall since April. Investors will also be reacting to the software problem discovered on Friday night, which is now largely fixed (see earlier post).
If the fall in cryptocurrency prices continues, it will cause problems for the new wave of bitcoin treasury companies who have been accumulating crypto assets.
The most notable bitcoin treasury company is Strategy (formerly Microstrategy) which has been bullishly acquiring Bitcoin using capital raised through equity and debt offerings.
Strategy’s plan drove its share price sharply higher in 2024.
But the share price has been sliding this year, down 40% during 2025, and has been under pressure since bitcoin began slipping from its record high of $125,000 in early October, to back below $90,000 today.
Bloomberg reports that Strategy’s CEO told a podcast on Friday that the Bitcoin-buyer could sell the token if its mNAV — a ratio of enterprise value to Bitcoin holdings — turned negative.
“We can sell Bitcoin and we would sell Bitcoin if we needed to fund our dividend payments below 1x mNAV,” said Phong Le, adding that it would be a last resort.
Britain’s financial regulator is laying out plans to clean up the environmental, social and governance (ESG) ratings sector.
The Financial Conduct Authority, which is being given responsibility for ESG ratings, says it wants to tackle conflict-of-interest concerns and improve transparency.
It is explaining that it wishes to bring in clear, proportionate rules for transparency and governance, with proposals which will focus on four areas:
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Increased transparency – allowing easier comparisons for the benefit of both those who use ratings and those who are rated.
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Improved governance, systems and controls – to ensure clear decision-making and strong oversight and quality assurance.
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Identification and management of conflicts of interest.
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Setting clear expectations for stakeholder engagement and complaints handling
Airbus’s technical glitches may not be over, once it has finished updating the software on its A320 fleet.
Reuters are reporting that the aerospace manufacturer has discovered an industrial quality issue affecting fuselage panels of several dozen A320-family aircraft, citing industry sources.
The suspected production flaw is delaying some deliveries but there are no immediate indications that it has reached aircraft in service, the sources said, asking not to be named.
Markets fall in ‘downbeat’ start to the week
A risk-off mood is gripping the markets at the start of December, knocking shares and crypto assets.
Most European markets are in the red, with Germany’s DAX down 1.2% and France’s CAC 40 losing 0.55%.
The UK’s FTSE 100 is less affected, down just 0.13%, with shares in mining companies rising.
The bitcoin price has fallen 5%, taking the largest cryptocoin down to around $86,650.
Joshua Mahony, chief market analyst at Scope Markets, says it’s a “largely downbeat start to the week”, adding:
Crucially, crypto has provided one area of particular concern, with the continued flush lower bringing financial stress for many that will also have positions across a raft of traditional assets.
The main piece of news for markets has come from overnight comments out of the BoJ, with Governor Ueda noting that the group will weigh up the pros and cons of a rate hike in December. While this provided a rare rise for the yen, it also saw yields spike with the 2-year hitting the highest level since 2008.
With a huge amount of Japanese funds invested abroad off the back of cheap local borrowing, the continued rise in Japanese bonds does raise risk of liquidity returning home to the detriment of international financial asset prices.
The Bank of England has also reported that consumer credit growth slowed in October.
Net borrowing of consumer credit by individuals decreased for the second consecutive month, to £1.1bn in October , down from £1.4bn in September.
The Bank adds:
Within this, net borrowing through credit cards slightly decreased, to £0.6bn from £0.7bn. Net borrowing through other forms of consumer credit was £0.5nb in October, down from £0.7bn in September.
UK mortgage approvals dip
Britain’s property sector did not shrug off budget uncertainty as well as the factory sector, it appears.
New Bank of England data shows that mortgage demand cooled in October.
There was a 600 drop in net mortgage approvals for house purchase in October, to around 65,000, the BoE reports. Approvals for remortgaging fell by 3,600 to 33,100, the lowest since February 2025.
Net borrowing of mortgage debt by individuals fell back to £4.3bn in October, after a rise to £5.2bn in September.
The BoE also reports that the ‘effective’ interest rate – the actual interest paid – on newly drawn mortgages dipped to 4.17% in October, down from 4.19% in September. That’s the lowest since January 2023.
This morning’s report also shows that UK companies paid down some debts in October.
Private non-financial corporations repaid, on net, £4.8bn of finance during the month, the highest level of net repayments since October 2023.
Thomas Pugh, chief economist at audit, tax and consulting firm RSM UK, says:
“The drop in consumer credit growth, mortgage approvals and net finance raised by private corporations suggests that households and firms were easing back on borrowing and major transactions ahead of last week’s budget. This will probably have been even worse in November as speculation reached fever pitch, but given the lack of any significant tax increases next year activity may bounce back in December and into next year.
“The drop in consumer credit growth to £1.1bn, down from £1.4bn in September and well below the £1.5bn six-month average was mainly driven by a drop in other loans, which would be consistent with households holding off from making major purchases ahead of the budget. However, the smaller increase in households saving balance suggests they weren’t rushing to hoard cash.
“What’s more, the drop in mortgage approvals to 65,018 is consistent with the recent weakness in house prices reported in a number of surveys. Now that there is some certainty around property taxes and interest rates are likely to be cut again in December, the housing market should pick up. But given the budget will boost demand slightly next rather than subtracting from it, the Bank of England is unlikely to cut rates significantly further or faster than priced in.
UK manufacturing sector returns to growth despite budget uncertainty
Happier news: The UK’s factory sector returned to growth last month for the first time in over a year.
The latest poll of UK purchasing managers across manufacturers shows that output across the sector rose last month, and that business optimism hit a nine-month high.
This pushed up the S&P Global UK Manufacturing Purchasing Managers’ Index (PMI) to a 14-month high of 50.2 in November, up from 49.7 in October. This is the first time since September 2024 that the PMI, which tracks activity in the sector, has come in above the 50-point mark that shows stagnation.
Rob Dobson, director at S&P Global Market Intelligence, says:
The numbers are especially encouraging as this improvement occurred despite November seeing elevated levels of business uncertainty, and in some cases an element of gloom, ahead of the Autumn Budget. “The lifting of this uncertainty caused by the long lead-in to the Chancellor’s budget announcement should hopefully provide a boost in December, but it will be interesting to see the extent to which business might react to the absence of any significant growth-promoting measures. After all, despite the improvement in the performance of the manufacturing sector, any growth is still worryingly weak.
Rising competitive pressures and slower cost inflation meanwhile led to factory gate prices being cut for the first time in over two years. This combination of soft industrial performance and subsiding price pressures will add to the shift in policy debate away from inflation fears towards supporting economic growth.”
