British manufacturing growth surged to a three-year high in April, adding to signs that factories are enjoying at least a temporary boost ahead of Brexit from the weak pound, a survey showed on Tuesday.
The Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) rose to 57.3 from 54.2 in March, exceeding all forecasts in a Reuters poll of economists which had pointed to a slight decline to 54.0.
The figures may be a small boon for Prime Minister Theresa May ahead of the June 8 national election, after official data last week showed the economy slowed sharply in the first three months of the year as inflation hurt consumers. (Full Story)
New factory orders poured in at the fastest rate since January 2014, while growth in orders from abroad was at a seven-month high, the PMI showed.
“The weak sterling exchange rate helped manufacturers take full advantage of the recent signs of revival in the global economy, and especially the euro zone, which is enjoying its best growth spell for six years,” said Rob Dobson, senior economist at PMI compiler IHS Markit.
Building on sharp gains after May announced her snap election on April 18, sterling hit a seven-month high against the dollar on Friday, which could limit the scope for further growth in export orders.
But a stronger pound should also soothe cost pressures for manufacturers, which cooled further in April after increasing at a record pace earlier this year.
That will be welcome news for Bank of England officials meeting next week to set interest rates, as some policymakers are uneasy about the likely extent of inflation’s rise.
Dobson questioned whether April’s growth spurt for manufacturing could be sustained as a slew of elections at home and abroad feed uncertainty in the months ahead.
“Other surges seen since the middle of last year have generally proved short-lived, as weak wage growth sapped consumer spending,” he said.
Officially measured manufacturing growth has been uneven, with quarterly growth slowing to 0.5 percent in the three months to March, according to data on Friday, though the year-on-year growth rate of 2.8 percent was the strongest since late 2014.
Recently Bank of England Deputy Governor Ben Broadbent said the current “sweet spot” for manufacturers might not last because Brexit negotiations could result in less access to the EU’s single market – or even in a generous deal that would push up the value of sterling. (Full Story)
Other surveys have painted similarly mixed pictures.
The Confederation of British Industry last week reported booming new orders for manufacturers but also a reduction in investment plans.
And a European Commission survey last week pointed to lackluster investment plans among British manufacturers for 2017, contrasting with French and German producers who plan larger increases in capital spending.
(Reporting by Andy Bruce; Editing by Hugh Lawson)