British economy gets surprise boost from manufacturing

Source: Xinhua| 2017-05-03 02:08:52|Editor: Mu Xuequan
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LONDON, May 2 (Xinhua) -- The UK economy got a surprise boost with unexpectedly good manufacturing figures for April, which experts attributed to strong domestic demand and rising exports.

The Purchasing Managers' Index (PMI) for last month exceeded expectations, jumping from 54.2 to 57.3 when the consensus forecast had been 54 (a score above 50 represents growth).

The survey was "overwhelmingly upbeat," said Ruth Gregory, a UK economist at the London-based economic data analysis firm Capital Economics, and was a marked improvement on the 2016 average of 52.3.

The survey's output balance is in line with a doubling of the growth rate in the manufacturing sector in the current quarter from the 0.5 percent growth seen in the first quarter of this year.

"The ratio of new orders to finished goods -- which is a fairly good predictor of future movements in the output balance -- picked up sharply too," said Gregory.

"Meanwhile, after falling back in recent months, the export orders balance rose once more, from 52.8 to 55.7 in April. As such, this provides us with some encouragement that an improvement in export volumes will now come through and that exporters have not just been using the drop in the pound to bolster their margins instead."

Weak sterling will have an impact on manufacturers who pay for their raw materials in dollars. But it also makes UK products more competitive on the international market, and the increasing cost of imports because of the fall of the pound means the domestic market is also benefiting.

Gregory noted that cost pressures remained strong in the survey, from 61.7 in March to 61.8 in April.

Howard Archer, chief UK and European economist at IHS Markit in London, said the figures were "a serious upward surprise."

The manufacturing sector has recently been showing the most life in the UK economy, helped by a competitive pound and decent global growth, said Archer.

The positive figures were a major boost in the slowing gross domestic product (GDP) figures for UK growth in the first quarter of 0.3 percent, said Archer, with the manufacturing sector showing 0.5 percent growth in the last quarter, outperforming the normally-resilient services sector's 0.3 percent growth.

"The April manufacturing PMI not only showed marked improvement in output, but a sharp pick-up in domestic orders led by the investment and intermediate goods sectors. Additionally, export orders were robust," said Archer.

Manufacturers pointed to stronger external demand for UK goods as a stimulus.

Lee Hopley, chief economist at the manufacturing organization EEF, said: "Against all expectations nine months ago, UK manufacturing appears to be in rude health, having navigated significant exchange rate swings and rising input costs, companies are capitalizing on the upswing in the world economy and pressing ahead with some new investments." (1 British pound = 1.29 U.S. dollars)