Roundup: Britain's manufacturing PMI shows unexpected slowdown
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E-mail Xinhua, September 2, 2014
Britain's Purchasing Managers' Index (PMI) for the manufacturing sector showed an unexpected slowdown in growth in August, yet the figures remain above the life-time average figure for the survey.
The August PMI figure fell to 52.5 (above 50 is growth) down from 54.8 in July. This was disappointing when set against economists' expectations of 55.1, but set against the survey's life-time average of 51.5 it looks rather better.
Economists recorded that weaknesses in export markets -- particularly Britain's largest export market the eurozone -- and growing geo-political uncertainty had dented figures.
Fabrice Montagne, UK economist with Barclays Economics Research, commented in a note, "The UK manufacturing PMI echoes similar developments in the euro area, where Germany, France and Italy failed to keep up positive momentum."
However, the exports sub-component of the PMI survey showed growth continued for the 17th consecutive month and orders rose from the United States, Canada, Asia and the Middle East.
The PMI figures' release Monday coincided with the latest quarterly survey from industry-representative body EEF which also recorded an easing in growth in the manufacturing sector.
The EEF survey highlighted concerns over eurozone weakness and the impact of geo-political events on business, and strong sterling.
Export orders turned negative for the first time since the first quarter (Q1) of 2013 at minus 4 percent, down from 9 percent in Q2 and 16 percent in Q1.
However, despite these worries businesses surveyed were still optimistic about export prospects, with a 22 percent figure for firms expecting a strong third quarter.
EEF chief economist Lee Hopley said, "There are clearly increasing downside risks overseas which could make sustaining strong growth and particularly stronger exports more challenging going forward."
The continued expansion of the manufacturing sector indicates there is no danger of economic growth being knocked off course. This will reassure members of the Bank of England's (BOE) rate-setting Monetary Policy Committee (MPC).
But the figures will also give no support to the two MPC members who last month voted for a rate rise. The slowing in growth figures in this sector of the economy will support the case of the other seven members of the MPC who wish to keep rates at the historical of 0.5 percent for a while longer.
These figures, together with the more significant services sector PMI figures which are released on Wednesday, will be to the fore in the minds of MPC members when they meet Wednesday and Thursday to decide if rates should rise. Endit
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