UK manufacturing slows more than forecast to 17-month low, says IHS Markit


LONDON • UK manufacturing slowed more than predicted in April, adding to signs that the economy’s poor first quarter (1Q) performance could persist.

IHS Markit said its monthly Purchasing Managers Index (PMI) was at 53.9, from a downwardly revised 54.9 in March. A 17-month low, it was worse than economists had forecast.

The figures are likely to further damp the possibility of the Bank of England (BoE) raising borrowing costs on May 10 and sent the pound lower yesterday.

An interest-rate hike this month was seen as a done deal until recently. Investors, who at one stage were assigning a more than 90% chance to such a move, have slashed those odds to about 20% after weaker than expected inflation, cautious comments from governor Mark Carney, and dismal growth figures for the 1Q of the year, partly due to snow that coated the country in March.

“While adverse weather was partly to blame in February and March, there are no excuses for April’s disappointing performance,” said Rob Dobson, director at IHS Markit.

“The chances of a near-term hike in interest rates by the BoE look increasingly remote.”

The pound fell after the report, sl iding 0.5% to US$1.3692 as of 9:49am London time yesterday. The currency has dropped for 10 of the past 11 days, af ter touching US$1.4377 (RM5.75) on April 17 — the highest since the immediate aftermath of the Brexit vote in June 2016.

Other PMIs to be published this week, including for construction and the dominant services sector, will set the backdrop for the Monetary Policy Committee (MPC) ahead of their decision next week.

“My immediate reaction to that is slightly worrying because if it was weather related we should be getting some stabi l isat ion,” Jim O’Neill, a former chairman of Goldman Sachs Asset Management and the next chair of the Chatham House think tank, said in a Bloomberg TV interview yesterday. “If I were an MPC voting member and had been thinking about a hike, I might be backing off a bit.”

Input-price inflation eased to a nine-month low, though it remained elevated, Markit said. Growth in new business orders eased to the weakest level in 10 months, with the slowdown particularly marked in consumer goods.

The downbeat trend will probably continue, Dobson said, with firms unlikely to boost output amid weak demand and rising stocks of unsold goods. Business optimism also dipped to a five month low due to concerns about Brexit, trade barriers and the overall economic climate.