Weak manufacturing figures failed to prevent leading stocks continuing to enjoy a record-breaking run, fuelled by better than expected public sector borrowing data.
Manufacturing output volumes fell at a sharp pace in the quarter to August, according to the CBI’s latest Industrial Trends Survey (ITS). The sector expects output to fall again over three months to November.
Total and export order books were both reported as below “normal” and were below their long-run averages. Stocks of finished goods were more than adequate in August, but that adequacy stands below the long-run average.
UK public sector borrowing was better than expected last month and, at least temporarily, distracted attention from higher taxes in the autumn.
Net borrowing, the difference between total public sector spending and income and excluding public sector banks, was £1.05 billion in July, well below the £22.56bn in June, and the £3.37bn 12 months earlier. It was also better than the £2bn market consensus.
The Office for National Statistics said it was the smallest July borrowing figure for three years.
The FTSE 100 closed at a record high for the third day on the bounce, up 21.06 points, or 0.2%, at 9,309.20.
AJ Bell head of financial analysis Danni Hewson said: “Miners and defence stocks were in vogue, boosted by their defensive qualities as investors digest the small print of the US-EU trade deal and nervously wait for more guidance from the closely watched Jackson Hole Symposium.
“There was also a bit of a feel-good factor generated from lower-than-expected government borrowing in July, as well as service sector PMI data which showed a significant surge in activity in August, suggesting the UK economy still has a bit of fuel in the tank.
“The average five-year fixed mortgage fell below 5% for the first time in two years in what feels like a real tipping point, with stability returning following the Bank of England’s rate cut earlier in the month even if inflation might scupper a further move this year.
The biggest FTSE 100 risers were Endeavour Mining, up 58p at 2,550p, BAE Systems, up 32.5p at 1,759.5p, Babcock International, up 17p at 996.5p and NatWest, up 9p at 562.6p.
Fallers were Legal & General, down 6.2p at 254.4p, Schroders, down 7.4p at 390.6p and Persimmon, down 20.5p at 1,103.0p.
Hays fell 1.7% as it reported a plunge in annual profit, confirming the bad news the company gave to the market in a profit warning back in June.
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