A dire February for Britain's manufacturers gave the pound another torrid day on the currency markets yesterday despite signs of a much-needed revival in business lending.
Industrial activity shrank for the first time since last November, according to the Chartered Institute for Purchasing and Supply's (Cips) latest snapshot. Its activity index slumped back below the 50 no-change mark to 47.9, down from January's 50.5 reading signalling modest growth.
The shock news sent the pound spinning more than 1 per cent lower – pushing it briefly below the psychologically important $1.50 mark – as traders bet on more money-printing from the Bank of England to avert an unprecedented triple-dip recession.
The worrying Cips survey found manufacturers cutting jobs at the fastest rate in more than three years as orders slipped for the second month in a row.
The surprise setback – caused in part by bad weather at the end of January – comes ahead of a knife-edge Bank of England vote next week. Three members of its policy committee – including the Governor, Sir Mervyn King – voted for an extra £25bn in quantitative easing last month.
David Noble, Cips chief executive, said: "February's disappointing figures will serve as a reality check for the manufacturing sector. Of concern is the dearth of encouraging signs for the future. The sector witnessed a fall in new orders at home and a continued lack of demand abroad."
The blow came despite the biggest jump in business loans for more than two years in January, according to Bank of England figures showing £1.9bn in new loans to firms. This was the highest since November 2010, raising hopes the Bank's Funding for Lending scheme is beginning to feed through into business credit.