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Financial News: UK Manufacturing Activity Expands More Than Forecast

UK Manufacturing Activity Expands More Than Forecast

06/01/2017 - 08:41:00 (RTTNews)

(RTTNews) - The UK manufacturing sector almost maintained its strong growth momentum on production and new orders, survey results from IHS Markit and the Chartered Institute of Procurement & Supply showed Thursday.

The headline factory Purchasing Managers' Index fell to 56.7 in May from April's three-year high of 57.3.

Nonetheless, the score was above the expected level of 56.5 and remained above 50, signaling an improvement in conditions for the tenth consecutive month.

Scott Bowman, a UK economist at Capital Economics, said the PMI suggests that growth in the sector has re-accelerated in the second quarter, following the slowdown in the first quarter.

And there are signs that this rate of growth will be maintained in the subsequent months, Bowman added.

The manufacturing sector should have sufficient momentum to see it through the uncertainty generated by the current unexpected general election and into the start of 'Brexit' negotiations later in the quarter, Rob Dobson, a senior economist at IHS Markit, said.

Manufacturing production and new orders both expanded at above survey average rates in May. Companies benefited most from the continued strength of the domestic market.

At the same time, weak currency and manufacturers' efforts to launch new products boosted overseas demand. Incoming new export orders advanced for the thirteenth month in a row.

Further, the ongoing expansion of the manufacturing sector had a positive impact on both business sentiment and job creation.

Optimism regarding the outlook for production levels in one year's time improved to a 20-month high.

Employment climbed for the tenth consecutive month in May, with the rate of jobs growth the fastest since June 2014.

Rates of inflation in input costs and output charges remained elevated in May, despite easing further from recent highs.

Increased costs reflected the historically weak exchange rate and rising raw material prices.

Despite easing to a five-month low, the increase in selling prices was still among the fastest seen in the survey history.

A report from the Nationwide Building Society earlier today showed that UK house prices declined for the third consecutive time for the first time since 2009.

House prices dropped unexpectedly by 0.2 percent month-on-month in May, following a 0.4 percent drop in April. Economists had forecast a 0.2 percent rise.

Providing further evidence that housing market is losing momentum, house price growth slowed to 2.1 percent from 2.6 percent in the previous month.

This was the weakest growth in almost four years. Prices were expected to climb 2.4 percent.

Robert Gardner, Nationwide's chief economist, expects small increase in house prices of around 2 percent over the course of 2017 as a whole.

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