A U.K. factory index unexpectedly fell this month to the lowest in 2 1/2 years as export demand weakened, indicating continued weakness in manufacturing, according to the Confederation of British Industry.
A gauge of orders dropped to minus 25, the lowest since October 2010, from minus 15 in March, the London-based business lobby said in a report published today. The median of 12 forecasts in a Bloomberg News survey was for a reading of minus 13. Still, the report also showed that manufacturers have become more confident, with a quarterly optimism index rising to 5 from zero in January.
Data this week will probably show the U.K. economy narrowly avoided falling into an unprecedented triple-dip recession in the first quarter, according to a poll of economists. Still, the recovery may struggle to gather momentum as weak demand in the euro area, Britain’s biggest export market, a fiscal squeeze at home and rising unemployment weigh on demand.
“This quarter was a mixed bag for manufacturing, with new orders disappointing because of a decline in domestic demand, but output did increase,” Stephen Gifford, CBI director of economics, said in a statement. “Although weaker sterling has eased concern about international competitiveness, manufacturers highlight the potentially chilling effect of political and economic instability abroad on export orders.”
The pound has fallen about 6.3 percent against the dollar this year and 5 percent versus the euro.
A monthly index of export orders fell to minus 21 in April from minus 11 in March, according to the CBI data. Expectations for output over the next three months rose 1 point to 23, while selling-price expectations increased to 8 from 5.
Within the quarterly survey, a gauge of orders for the past three months slipped 2 points to minus 6 and the outlook for the next quarter was at 18.
The CBI conducted the survey of 380 manufacturers between March 21 and April 10.
The median forecast of 37 economists surveyed by Bloomberg News is for the economy to have skirted a slump in the first quarter with gross domestic product growth of 0.1 percent. Still, Bank of England policy maker Martin Weale said on April 18 that he wouldn’t be surprised if GDP fell. The Office for National Statistics will release the data on April 25 in London.
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