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U.K. Manufacturing Output Shrinks Less Than Economists Forecast

A sign for the Bank Of England
The sovereign debt turmoil in Europe, the U.K.’s biggest export market, has dimmed the outlook for manufacturers, and the Bank of England has said the economy may have stagnated. Photographer: Chris Ratcliffe/Bloomberg

Jan. 3 (Bloomberg) -- U.K. manufacturing shrank less than economists forecast in December as demand increased in Germany and China.

A gauge of factory output based on a survey by Markit Economics and the Chartered Institute of Purchasing and Supply rose to 49.6 from a revised 47.7 in November, the groups said in an e-mailed statement today. The median forecast of 19 economists in a Bloomberg News survey was for a drop to 47.3 from an initially reported 47.6 in November. A level below 50 indicates contraction.

The sovereign debt turmoil in Europe, the U.K.’s biggest export market, has dimmed the outlook for manufacturers, and the Bank of England has said the economy may have stagnated. Markit said the average reading for the manufacturing index in the fourth quarter was the weakest in more than two years.

Manufacturing will “likely be a drag on the economy in the closing months of the year,” said Rob Dobson, an economist at Markit. “Manufacturers are currently relying heavily on backlogs of work to prop up production. This is only a temporary fix, and the trend in overall order books needs to improve if the sector is to avoid a protracted period of lacklustre performance.”

A measure of new export orders increased for the first time in five months in December, Markit said. The gain was led by demand from customers in Germany, Eastern Europe and China.

To contact the reporter on this story: Jennifer Ryan in London at jryan13@bloomberg.net

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

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