BLBG: U.K. Factories Struggle as Consumers Help Drive Economic Growth
U.K. manufacturing unexpectedly slowed to a three-month low in December as weak growth in overseas markets such as the euro area undermined demand.
Markit Economics said its Purchasing Managers’ Index fell to 52.5 from a revised 53.3 in November. A reading above 50 indicates expansion. Economists forecast the gauge would rise to 53.6 from a previously reported 53.5 in November, according to the median estimate in a Bloomberg News survey.
The report showed overseas orders stagnated in December, highlighting the economy’s dependency on domestic demand to sustain growth. Separate data today revealed consumer credit rose the most in almost seven years in November.
“The long hoped-for economic rebalancing story is not playing out as envisaged,” said James Knightley, an economist at ING Bank NV in London. “With employment and real household disposable income set to rise robustly in 2015, consumer spending looks set to become the U.K.’s main growth engine once again.”
The Bank of England said today that consumer credit rose 1.3 billion pounds ($2 billion) in November, the most since February 2008. It also said mortgage approvals declined in November, though by less than economists forecast. Homeloans fell to 59,029 from 59,511 in October. Economists had forecast at drop to 58,700.
‘Ongoing Slowdown’
Markit said its report is “further evidence of the ongoing slowdown” in U.K. manufacturing. “The main weak spot remains exports,” said Rob Dobson, an economist at Markit in London.
The survey showed measures of overall orders and output growth both fell to their second-lowest level in the past 1 1/2 years, while price pressures remained contained. U.K. inflation slowed to the least in more than a decade in November, led by tumbling oil prices. Dobson said factory input costs “fell sharply” in December.
“Waning inflationary pressures in industry will therefore continue to provide some leeway for the Bank of England to hold off from raising interest rates if slower global growth persists,” he said.
The BOE’s Monetary Policy Committee will announce its first policy decision of 2015 on Jan. 8. Economists in Bloomberg’s monthly survey predict it will keep the key interest rate unchanged until the third quarter.
To contact the reporter on this story: Scott Hamilton in London at shamilton8@bloomberg.net
To contact the editors responsible for this story: Fergal O’Brien at fobrien@bloomberg.net Jana Randow, Paul Gordon
