LONDON: British manufacturing grew more quickly than expected in February, adding to signs that the country’s economic recovery is broadening out, and job creation in the sector hit a 33-month high, a survey showed yesterday.
But growth in new export orders slowed, due in part to the recent appreciation of sterling, underscoring the challenges facing the manufacturing sector.
The Markit/CIPS Manufact-
uring Purchasing Managers’ Index (PMI) ticked up to 56.9 from 56.6 in January, higher than the 56.5 expected by economists but below November’s near three-year high of 58.1. Readings above 50 point to growth in activity.
The employment subindex rose at its fastest pace since May 2011 — 55.4 in February from 54.1 in January — as companies came under strain to meet demand with existing capacity.
The Bank of England this month broadened the focus of its forward guidance policy towards a wider assessment of spare capacity as it tries to gauge when the economic rebound might become inflationary.
Official data last week showed Britain’s economy was boosted by business investment and exports in the fourth quarter, the kind of more sustainable growth that the BoE is looking for.
Manufacturing accounts for around a tenth of Britain’s economy. “The survey suggests we should expect another quarter of robust economic growth in the first quarter,” said Rob Dobson, senior economist at Markit, which compiles the survey.
“This mini-renaissance in manufacturing is also driving the sharpest job creation since the middle of 2011, which will support the broader economic recovery through improved consumer confidence and spending.”
British finance minister George Osborne has said he plans to include measures to help investment and exporters in a budget announcement due on March 19.
A survey released earlier yesterday showed more British manufacturers are bringing production home, another hopeful sign for the government’s push to reduce the economy’s reliance on consumer spending and housing.
Dobson said the slower increase in new export orders — the subindex for which eased to 55.1 in February from a near three-year high of 57.3 in January — could be attributed in many cases to the recent appreciation of sterling.
The pound has risen more than 10 percent since March last year and while there is little evidence this increase has had a material impact on exports, Bank of England officials have started to express concern. BoE policymaker Ian McCafferty said this week that further strengthening would be a worry.
“It’s not something they (companies) usually put a lot of focus on,” Dobson said, referring to the appreciation of sterling. “This month there was a more noticeable volume of companies who mentioned it.”
Factory output and new orders remained solid but slowed in February. The output subindex eased to 58.4 in February from 59.3 in January, and new orders crept lower to 60.7 from 61.3 in January, the survey showed.
The BoE also released usage statistics for its Funding for Lending Scheme (FLS), introduced with the government in 2012 to boost lending to households and businesses.
Net lending by FLS participants was £5.8bn ($9.7bn) during the fourth quarter of 2013, down slightly from an upwardly revised £6.2bn in the third quarter.
Reuters
