Rebound in UK output may have hit its peak
By Matt Falloon |
July 2, 2010, Friday
|
Print Edition
Print Edition
A rebound in British manufacturing slowed from a 15-year high in June as export orders growth all but ran out of steam, a survey showed yesterday, suggesting the sector's recovery may have peaked.
The Markit/Chartered Institute of Purchasing and Supply manufacturing PMI fell to 57.5 last month from 58.0 in May, bang in line with forecasts for a slight easing but still above the 50.0 mark that separates contraction from growth.
"The rate at which the sector has been recouping the output lost during the recession has been nothing short of remarkable, with around one-third having been recovered by the end of June," said Markit senior economist Rob Dobson.
"However, the latest survey offered signs that conditions may have passed their peak ... With the impact of austerity measures on demand both here and abroad still unknown, the latter half of the year may provide a real test for the sustainability of the recovery."
Britain's coalition government has proposed to eliminate most of a record budget deficit of about 11 percent of national output by the time of the next parliamentary election in 2015.
That has raised concerns Britain's fragile recovery from an 18-month slump could halt as the government cuts spending and hikes taxes.
Financial markets brushed off the PMI figures and analysts said they would need more proof that Europe's debt crisis was hurting trade before calling the peak in UK manufacturing.
"It could be a one-off or it could be something more fundamental," said Philip Shaw, chief economist at Investec. "We'll have to gauge next month's survey and other evidence to determine if this is the case."
The PMI survey showed export orders growth, which had been helped the last year by a weaker pound, had nearly ground to a halt.
The Markit/Chartered Institute of Purchasing and Supply manufacturing PMI fell to 57.5 last month from 58.0 in May, bang in line with forecasts for a slight easing but still above the 50.0 mark that separates contraction from growth.
"The rate at which the sector has been recouping the output lost during the recession has been nothing short of remarkable, with around one-third having been recovered by the end of June," said Markit senior economist Rob Dobson.
"However, the latest survey offered signs that conditions may have passed their peak ... With the impact of austerity measures on demand both here and abroad still unknown, the latter half of the year may provide a real test for the sustainability of the recovery."
Britain's coalition government has proposed to eliminate most of a record budget deficit of about 11 percent of national output by the time of the next parliamentary election in 2015.
That has raised concerns Britain's fragile recovery from an 18-month slump could halt as the government cuts spending and hikes taxes.
Financial markets brushed off the PMI figures and analysts said they would need more proof that Europe's debt crisis was hurting trade before calling the peak in UK manufacturing.
"It could be a one-off or it could be something more fundamental," said Philip Shaw, chief economist at Investec. "We'll have to gauge next month's survey and other evidence to determine if this is the case."
The PMI survey showed export orders growth, which had been helped the last year by a weaker pound, had nearly ground to a halt.
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