Industry bounces back after disastrous July
Britain's manufacturers bounced back from a dire July last month, lessening the chances that the Bank of England will be forced into a return to the printing presses, according to an influential industry survey.
The Chartered Institute of Purchasing & Supply/Markit purchasing manager survey, where a score over 50 indicates growth, jumped from 45.2 to 49.5 last month. The latest snapshot shows the industry in its best health for four months and all but holding its ground rather than slipping further into decline.
The brighter picture contrasted with survey evidence from the eurozone where the sector has been stuck in recession for 13 months and looks like dragging the region back into recession.
The Bank of England had been expected to extend its quantitative easing money-printing programme beyond the current £375bn in November, although experts said this may no longer be necessary if the fightback continues.
George Buckley, Deutsche Bank's chief economist, said the survey was "still consistent with falling output" but added: "It is not at a level that would suggest the need for extra stimulus by the BoE – which we think will be happy to allow the current QE programme to continue until expiration in November, without announcing more purchases or cutting interest rates."
Although UK production slipped in August, it was a far shallower fall than seen the previous month. Makers of consumer goods managed "solid growth", although a poor month for producers of equipment such as plant and machinery kept overall output just below the crucial no-change 50 mark. Encouragingly, new order growth is stagnant rather than falling, exports fell far more slowly and firms added staff for the second month in a row.
David Noble, Cips' chief executive, said: "We can take consolation from August's figures in that they were 'less bad' than the disastrous month before. We have witnessed a return to the status quo of flat growth in a fragile economy. This is a positive in itself, as a repeat of last month's performance would have been unthinkable."
Despite the better news, the woes of UK manufacturers knocked 0.1 per cent off growth between April and June and are likely to drag again in the current quarter.
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