U.K. manufacturing growth unexpectedly cooled in December as export demand weakened, highlighting headwinds to the recovery.
A gauge of factory activity fell to 57.3 from a revised 58.1 in November, Markit Economics said in a report in London today. The index has been above the 50 level that divides expansion from contraction for nine straight months. A separate report showed manufacturing in China weakened last month, while economists forecast that it cooled in the U.S.
Prime Minister David Cameron said yesterday that Britain’s recovery “is real, but it’s also fragile,” and the government has a five-point plan to spur growth. While the economy is strengthening, Bank of England Governor Mark Carney has said that policy makers won’t consider raising interest rates at least until unemployment drops to 7 percent.
“Assuming commodity prices do not rise much further, we believe the manufacturing sector will continue to recover in 2014,” said Samuel Tombs, an economist at Capital Economics Ltd. in London. “Although overseas demand may remain relatively weak, the easing of both credit constraints and the squeeze on households’ real earnings should boost domestic demand for investment and consumer goods.”
Economists forecast a reading of 58.4 for the manufacturing index in December, based on the median of 24 estimates in a Bloomberg News survey. The pound was little changed at $1.6553 as of 10:43 a.m. London time.
Markit said that for the fourth quarter of 2013, the average U.K. factory index reading was 57.2, the highest since the first three months of 2011. Rob Dobson, an economist at Markit, said manufacturing output growth probably exceeded 1 percent in the three months.
In December, new order growth remained “robust” and employment rose, while new export business increased for a ninth month, Markit said. Still, the rate of export growth was the weakest since September.
Chinese manufacturing gauges slipped in December, underscoring the challenges for President Xi Jinping as he tries to sustain economic momentum while rolling out reforms.
A measure from HSBC Holdings Plc and Markit fell to 50.5 from 50.8 the previous month, according to a statement today. A separate gauge compiled by the statistics bureau and logistics federation released yesterday declined to 51 from 51.4.
A measure of manufacturing in the U.S. by the Institute for Supply Management declined to 56.8 in December from 57.3, according to a Bloomberg survey of economists. A report on jobless claims in the world’s largest economy may show an increase to 342,000 in the week of Dec. 28 from 338,000 the previous week.
In the euro area, an index of manufacturing rose to 52.7 in December from 51.6 in November, Markit said in a separate report. That’s unchanged from an initial estimate published on Dec. 16. While the measure for Germany increased, France’s declined to a seven-month low.
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