London: British manufacturing activity grew last month at its fastest rate in more than 15 years, a survey of purchasing managers showed on Tuesday, boosting hopes that the broader economic recovery is gathering momentum.
The Chartered Institute of Purchasing and Supply/Markit manufacturing PMI rose to 58.0 in April from an upwardly revised 57.3 in March, a bigger rise than the one implied by the consensus forecast of 57.4.
It was the highest reading since September 1994, when Britain’s economy was also emerging from a deep recession. The survey has been above the 50-mark that separates expansion from contraction since July last year.
Coming two days before a national election on 6 May, the figures may be seized on by supporters of the ruling Labour Party as evidence that the government’s pro-growth stance is working. However, Labour is trailing in opinion polls, and most commentators expect a hung parliament with no party gaining an outright majority.
The detail of the survey suggested a broad-based improvement in manufacturing activity.
New orders rose at their fastest pace in more than six years, helped by the strongest growth in export orders since the series began in 1996. Output growth remained strong and employment rose for the third time in the past four months.
In a further sign of the strength of demand, firms reported the first increase in backlogs since the series began in 1999.
“Manufacturers reported a flying start to the second quarter, with the weak pound boosting export growth to the fastest for at least 15 years,” said Rob Dobson, senior economist at Markit.
“The feeding through of rapid output growth to job creation is particularly good news, and bodes well for the sustainability of the UK economic recovery.”
Price pressures grow
The survey cited improved global demand and the ongoing weakness of sterling as factors underpinning the rise in export sales. But the weak pound also contributed to a pick-up in price pressures, with input price inflation surging to its highest since August 2008.
“Increased input costs were blamed on widespread raw material price increases, in many cases reflecting exchange rate or supply-chain factors,” the survey noted.
Markit said its survey pointed to manufacturing output growing by as much as 2% in the latest three months, suggesting the sector will provide a strong contribution to second-quarter gross domestic product.
However, strong readings from the manufacturing PMI survey have not always been matched by official output data and some economists say that the survey overstates the true picture.
Britain’s economy pulled out of recession at the end of 2009 but the recovery slowed in the first three months of this year, hurt by a severe snow disruption and a rise in value-added tax.
While growth is likely to pick up in the next few quarters, headwinds remain, not least from a fiscal squeeze that economists reckon will be the toughest in at least 30 years.
The Bank of England has held interest rates at a record low of 0.5% for more than a year is not expected to raise rates until the fourth quarter of this year at the earliest.