UK manufacturing growth at ten-month high
British manufacturing activity expanded at its fastest pace in 10 months in March, driven by a pick-up in new orders and increasing the chance that Britain’s economy grew in the first three months of 2012 and avoided a recession.
Together with signs that a surge in firms’ costs could fuel inflationary pressures, the improvement in the sector is adding to views that the Bank of England may shy away from another cash injection to boost the fledgling recovery.
The Markit/CIPS Manufacturing Purchasing Managers’ Index (PMI) rose to 52.1 in March from an upwardly revised 51.5 in February, confounding analysts’ forecasts for a drop to 50.7 and hitting the highest level since May 2011.
The index has been above the 50 level that separates expansion from contraction since December.
The survey indicated manufacturing output growth of 0.3 per cent in the first quarter of 2012 after its 0.7 per cent decline contributed to the overall contraction of the economy in the final quarter of 2011, Markit economist Rob Dobson said.
“This is obviously nowhere near a strong pace, but it is at least sufficient to prevent the sector from remaining a drag on broader GDP growth,” he said.
“Inflows of domestic and export orders also showed some improvement in March, but exporters are having to tap markets further afield as conditions in the euro zone remain lethargic,” he added.
The figures will reinforce expectations that the Bank of England will hold off injecting more stimulus into the economy once its £325bn quantitative easing programme is complete in May, especially if an equivalent survey of the services sector, due on Wednesday, also shows a pick-up.
All 63 economists in a Reuters poll expect the BoE to leave rates at a record low 0.5 per cent at its monthly policy meeting this week and keep its asset purchase target unchanged.