UK factory growth slows, but still set for strong first quarter

[LONDON] Britain's factory sector grew more slowly than expected in February but still looks set to help the economy keep up its strong, post-Brexit vote momentum in early 2017, a survey showed on Wednesday.

The Markit/CIPS UK Manufacturing Purchasing Managers' Index (PMI) also showed a slight easing in inflation pressures, which had been rising at a record pace after the tumble in the value of the pound triggered by the decision to leave the European Union.

The overall manufacturing PMI slipped to 54.6 from 55.7 in January, below the median forecast of 55.6 in a Reuters poll of economists.

However, the figure remained close to December's two-and-a-half-year high.

Rob Dobson, an economist at IHS Markit, said the survey suggested manufacturing output growth close to 1.5 per cent in the first quarter, which would be one of the best performances in the last seven years.

"The big question remains as to whether robust growth can be sustained or whether it will continue to wane in the coming months," he said.

Slower growth in new orders and a drop in backlogs of work suggested a slowdown, but high levels of optimism among firms, job creation, a recovery in export orders and rising levels of purchasing suggested it would be mild.

Manufacturing accounts for around 10 per cent of Britain's economy, a fraction of the size of the dominant services industry. Markit is due to publish its PMI for services on Friday.

The Bank of England is watching closely for signs of a slowdown in Britain's economy this year, caused by rising inflation and weaker spending power among consumers. However, it has forecast growth of 2 per cent, stronger than expected by economists polled by Reuters.

REUTERS