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Three-year high for manufacturing growth

Business & Economy 02 May 2017
Three-year high for manufacturing growth

Weak pound prompts manufacturing growth spurt

Latest figures prompt hopes that UK factories could offset a slowdown in economic growth caused by a squeeze on consumers.

Image: Manufacturing exports have been boosted by the weak pound

By John-Paul Ford Rojas, Business Reporter

The weak pound helped Britain's manufacturing sector grow at its fastest pace for three years last month, closely-watched survey data showed.

Figures from the Markit/CIPS Purchasing Managers' Index (PMI) offered hope that Britain's factories could help offset an economic slowdown driven by a squeeze on consumers.

The survey – where the 50-mark separates growth from contraction – gave a better-than-expected reading of 57.3 for April, up from 54.2 in March.

It comes days after official figures showed UK growth slowed to a worse than expected 0.3% in the first quarter of the year, down from 0.7% in the fourth quarter.

The pound's plunge since last year's Brexit referendum has hurt consumers because it has made imported goods more expensive, pushing up inflation at a time when wage growth is stalling.

But it so far appears to have proved a positive for manufacturers – despite pushing up the cost of their raw materials – as it means that their goods can be more competitively sold overseas.

:: The accidental rebalancing of the UK economy

The latest survey said weak sterling and stronger global market conditions had helped drive higher demand from customers in North America, Europe, Africa and Brazil.

Rob Dobson, senior economist at IHS Markit, said: "The weak sterling exchange rate helped manufacturers take full advantage of the recent signs of revival in the global economy.

"The big question is whether this growth spurt can be maintained, especially given the backdrop of ongoing market uncertainty and a number of political headwinds such as elections at home and abroad."

Ruth Gregory, UK economist at Capital Economics, said: "After last week's surprisingly-downbeat Q1 GDP figures, today's survey provides us with optimism that the manufacturing sector should play a bigger role in offsetting the slowdown in the consumer services sector ahead."

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