Slowing UK Manufacturing Sector Suggests Delay to Potential BoE Rate Hike

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Slowing UK Manufacturing Sector Suggests Delay to Potential BoE Rate Hike

Slowing UK Manufacturing Sector Suggests Delay to Potential BoE Rate Hike



The UK manufacturing sector's strong recovery slowed significantly last month, with concerns regarding the crisis in Ukraine hampering foreign demand and denting expectations for a more balanced economic recovery.

According to the manufacturing purchasing managers' index (PMI) published by Markit and the Chartered Institute of Purchasing and Supply today, factory orders from the UK and abroad increased at the slowest pace in more than 12 months.

The headline PMI result dropped to its lowest level since June 2013 at 52.5.

This is significantly below the consensus estimate and represents a sharp drop from the downwardly-revised 54.8 reading in July.

While the index remained above the 50 level separating growth from contraction, coupled with data from the Bank of England detailing a sharp increase in high street lending in June, it suggests the UK's economic recovery will continue to rely heavily on big-spending consumers.

The bank has warned that areas such as business investment need to take some of the strain before policymakers will decide to lift interest rates.

Although two members of the BoE's Monetary Policy Committee called for higher borrowing costs last month, today's report has reinforced the view the bank will wait until next year before taking action.

Ailing European Markets Weighing

Manufacturers' organisation EEF said the country remains on track to record a significant increase in output this year, but warned ailing overseas markets have dampened demand.

Eurozone PMI surveys showed manufacturing across the region weakened to a 14-month low, with the heightened geopolitical tensions largely blamed for this.

Earlier today, Ukrainian President Petro Poroshenko claimed Russia has engaged in 'direct and open aggression'.

Rob Dobson, senior economist at Markit, said: 'It is becoming increasingly evident that UK industry is not immune to the impacts of rising geopolitical and global market uncertainty.'

EEF has also trimmed its 2014 industry growth forecast, with its members reporting a fall in export orders.




By Jonathan Sudaria, 1 September 2014


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