Britain’s manufacturing growth accelerated more than economists forecast last month as domestic strength offset weakness in Britain’s main export markets.
Markit Economics said its Purchasing Managers’ Index rose to 54.1, the highest in seven months, from a revised 53.1 in January. Economists had forecast a reading of 53.3, based on the median estimate in a Bloomberg News survey.
Britain’s economy has shown signs of continued strength after growing 2.6 percent in 2014, as the decline in oil prices lowers input costs, helping companies at a time of weak growth in the euro area. Still, Markit said the UK recovery remains uneven, investment and exports lagging behind the consumer side of the economy.
“Scratching beneath the surface and we see a lop-sided upturn,” said Rob Dobson, a senior economist at Markit in London. “It seems that, despite years of talk about a rebalancing of growth, we are still seeing only limited headway in moving away from consumer-driven expansions.”
Markit said new orders rose in February, “underpinned by rising volumes of new business from domestic based clients.” The export performance deteriorated for the fourth time in five months, partly reflecting the strength of the pound, it said.
Deflationary Pressure
There was a “substantial reduction” in input prices, with sterling’s advance helping to lower import costs. The pound reached the strongest in seven years versus the euro last week. The drop in costs is feeding through to selling prices, “adding to the short-term deflationary pressures in the economy,” according to the report.
Markit will publish its indexes for construction on Tuesday and services, the biggest part of the economy, on Wednesday. The services measure is forecast to rise to 57.5 from 57.2.
A day later, the Bank of England’s Monetary Policy Committee will probably keep the key interest rate at a record-low 0.5 percent, according to a Bloomberg survey. While inflation has slowed to 0.3 percent, below the BOE’s 2 percent target, officials have said they’ll look through that weakness and the next likely policy move will be tightening.
The median forecast of economists is for a quarter-point increase in the key rate in the fourth quarter of this year.
Nation of Savers
Britain has increasingly become a nation of savers in the aftermath of the financial crisis in 2008, according to a new study from Scottish Widows. The number of savers tucking away money on a regular basis is now up to 74 percent of the population, meaning roughly three in four have a rainy day fund.
Five years ago, a smaller 63 percent were saving with the percentage steadily rising ever since, the annual report shows. And in a move which may be down to people wanting to build a safety net after the economic troubles experienced in 2008, there has been a steady rise in the number saving for the long-term, the poll of 5,000 people showed.
The average amount people have collectively, in short and long-term savings, now stands at £32,407 ($49,956), compared to £30,175 last year, marking a seven percent rise.
Stocks at New Record
UK stocks rose modestly to a new record high on Monday morning on the back of gains in the banking and mining sectors, tracking a strong performance on Asian markets overnight after a rate cut in China.
The FTSE 100 was up 0.3% at 6,969.46 within the opening hour, having risen as high as 6,972.01 in early deals. That was ahead of the previous intraday all-time high of 6,967.24 reached on Friday.
Asian markets rallied Monday after China’s central bank cut interest rates, driving stock indices higher across the region on hopes that Beijing will take a supportive stance on ensuring growth.
