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UK factory output growth slows more than expected in November - Markit

Reuters
Updated

By David Milliken

LONDON, (Reuters) - British manufacturing growth slowed last month from the rapid pace recorded in October, but remained above lacklustre rates seen earlier in the year as export orders picked up, a business survey showed on Tuesday.

The Markit/CIPS manufacturing Purchasing Managers' Index (PMI) dropped to 52.7 in November from a 16-month high of 55.2 in October, a bigger decline than the drop to 53.6 pencilled in by economists in a Reuters poll.

But it was still above average for this year, and came alongside the fastest growth in export orders since August 2014.

"Although the pace of growth so far is only very modest, it positions manufacturing as less of a drag on the broader economy," Markit economist Rob Dobson said.

Markit's surveys have painted a brighter picture of British manufacturing than official data, which has shown the sector stagnant or contracting since the start of the year.

Services has been the main driver of expansion, and Markit said this would need to be the case again in the economy was to grow at the 0.6 percent quarterly rate which the government has forecast for the final three months of 2015.

Britain had the fastest-growing major economy last year, and is likely to be at the top of the pack this year, but it relies heavily on domestic demand.

The PMI survey showed consumer goods manufacturers were doing best, while the greatest growth in export orders came from the United States, Germany, the Middle East and East Asia.

Sterling strength has weighed on demand for British exports in much of the euro zone.

BoE policymaker Gertjan Vlieghe said in a newspaper interview on Sunday that this was one reason for the central bank not to rush into raising interest rates.

Manufacturing employment dropped fractionally, after a chunky gain in October, and manufacturers' raw materials costs and selling prices both fell for another month, contributing to the deflationary environment for British goods prices.

(Editing by Toby Chopra)