U.K. Manufacturing Grows More Than Forecast on Exports: Economy
U.K. manufacturing grew more than economists forecast in April as output surged to an eight-month high and exports increased.
A Purchasing Managers’ Index advanced to 57.3 from 55.8 in March, Markit Economics said in a statement in London today. The median estimate of 32 economists in a Bloomberg News survey was for a reading of 55.4. A level above 50 indicates expansion.
The report adds to evidence that the U.K. recovery is broadening beyond consumer spending, after data this week showed factory production expanded the fastest in four years in the first quarter. Bank of England policy makers have pledged to keep the key interest rate at a record low until slack in the economy is used up.
“Manufacturing continued its surging start to 2014, with output growth accelerating in April to a level among the highest signaled over the past two decades,” Rob Dobson, a senior economist at Markit, said in a statement. “Supporting these efforts are a strong domestic market and improving global economic conditions.”
The findings suggest manufacturing growth in the second quarter may exceed 1.5 percent, Dobson said. Data this week showed factory output expanded 1.3 percent in the first three months of the year, the fastest since the second quarter of 2010.
Markit’s index of output climbed to 61.9, the highest level since August, from 58.7 in March. Activity improved in consumer, intermediate and investment goods. New export orders rose for a 13th month with improved demand from North America, Europe, Asia and the Middle East.
“Driven by an accelerating domestic economy, aided and abetted by returning euro-zone growth, U.K. manufacturing could well beat the first quarter’s 1.3 percent quarter-on-quarter growth in the second quarter,” said Rob Wood, an economist at Berenberg Bank in London. “That poses upside risks to our already above-consensus 3.1 percent annual growth forecast for 2014.”
A measure of factory input prices showed a second month of contraction while output prices rose for a 10th month, easing pressure on manufacturers’ margins, Markit said.
“Companies reported that lower input costs reflected reduced metal prices, successful negotiations with suppliers and exchange-rate factors,” it said.
The pound strengthened this year as Britain’s recovery gained traction and BOE officials said they won’t risk choking off expansion by tightening policy too soon. Data this week showed gross domestic product growth accelerated to 0.8 percent in the first quarter from 0.7 percent in the previous three months.
Britain’s property market, bolstered by a strengthening economy and record-low borrowing costs, is helping to drive improving consumer confidence.
Nationwide Building Society said today that U.K. house-price growth accelerated in April as a surge in London pushed the annual increase to the most since before the financial crisis struck. The average value of a home increased 1.2 percent from March to 183,577 pounds ($310,000), the lender said in a report. Prices jumped 10.9 percent from a year earlier, the biggest annual gain since June 2007.
Separately, the BOE said today that U.K. mortgage approvals unexpectedly fell for a second month in March. Banks and building societies granted 67,135 loans for house purchase, compared with downwardly revised 69,592 in February, it said. The median forecast of 23 economists in a Bloomberg News survey was for 72,000 in March.
The decline may have been caused by lenders tightening borrowing standards as they prepared for new affordability tests that came into force late last month, economists said.
BOE policy makers meeting next week will make their decision with new economic projections prepared for the quarterly Inflation Report on May 14. Governor Mark Carney told the Bristol Post newspaper this week that the recovery is broadening, though there remains “considerable slack” in the labor market.
Elsewhere, Chinese manufacturing grew less than analysts estimated in April, highlighting weakness in the economy from exports to construction that could force extra government measures to support growth. China’s Purchasing Managers’ Index (CPMINDX) was at 50.4, the National Bureau of Statistics and China Federation of Logistics and Purchasing said today in Beijing, less than the 50.5 median estimate of 38 analysts in a Bloomberg News survey. March’s reading was 50.3, with numbers above 50 signaling expansion.
To contact the reporter on this story: Jennifer Ryan in London at firstname.lastname@example.org