U.K. Manufacturing Grows in January as Expansion Cools

Photographer: Simon Dawson/Bloomberg

While manufacturing grew 0.9 percent from the third quarter, it was still about 10 percent below its pre-recession peak in 2008, the ONS said. Close

While manufacturing grew 0.9 percent from the third quarter, it was still about 10... Read More

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Photographer: Simon Dawson/Bloomberg

While manufacturing grew 0.9 percent from the third quarter, it was still about 10 percent below its pre-recession peak in 2008, the ONS said.

U.K. manufacturing expanded at a slower pace in January as domestic demand and rising export orders underpinned growth for a 10th month.

The Purchasing Managers’ Index declined to 56.7 last month from 57.2 in December, above the 50 level that indicates growth, Markit Economics said in a report in London today. That’s less than the 57.3 forecast by economists. The pound extended declines against the euro and the dollar.

“The U.K. manufacturing PMI has dipped a touch, but is still consistent with very strong growth,” said James Knightley, an economist at ING Bank NV in London. Today’s data adds to evidence “that investment spending will finally start to pickup and drive the recovery over coming years,” he said.

A gauge of China’s manufacturing slid to a six-month low, separate data showed, while the industry in the euro area expanded faster than initially estimated. In the U.S., the rate of manufacturing growth cooled, economists predicted before a report due at 10:00 a.m. in Washington.

The U.K. economy expanded 0.7 percent in the fourth quarter, ending the best year since 2007 amid growth in every industry except construction. While the U.K. factory gauge was at its lowest level in three months in January, it is above the series’ average, Markit said today.

The pound fell 0.6 percent to $1.6333 at 11:51 a.m. in London, the lowest level since Jan. 17. Sterling weakened 0.8 percent to 82.70 pence per euro.

New Orders

Bank of England officials will probably hold their key rate at a record-low 0.5 percent this week as the strength of the economy forces them to reconsider their forward guidance, a policy aimed at persuading consumers and businesses that borrowing costs will stay low.

In January, U.K. new order growth remained above its long-run average and employment increased for a ninth consecutive month, Markit said. Manufacturers cited better demand from North America, Europe, Asia, Brazil, Scandinavia and the Middle-East, the report showed. The rate of increases in purchasing costs was the weakest since July, Markit said, while output charges rose for a seventh month.

While manufacturing grew 0.9 percent from the third quarter, it was still about eight percent below its pre-recession peak in 2008, the ONS said last week.

Domestic Market

“Although the pace of output expansion has cooled slightly in recent months, growth is still tracking at one of the highest rates in the 22-year survey history,” Rob Dobson, an economist at Markit, said in today’s report. “The domestic market remains the main pillar of the rebound. Rebalancing of economic growth may also finally be within sight.”

Euro-area factory output expanded faster than initially estimated in January, led by Germany and France, as the currency bloc’s economic recovery gained traction. An index of the manufacturing industry there increased to 54 from 52.7 in December, Markit said. That exceeds an initial estimate of 53.9, released on Jan. 23.

The Chinese Purchasing Managers’ Index was at 50.5 last month compared with 51 in December as output and orders slowed, the National Bureau of Statistics and China Federation of Logistics and Purchasing said Feb. 1 in Beijing. The data adds to signs that government efforts to rein in excessive credit will cool growth in the world’s second-largest economy.

To contact the reporter on this story: Scott Hamilton in London at shamilton8@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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