Factories forge ahead to lift hopes of growth
FACTORY output hit a 10-month high in February to further boost hopes the UK economy will return to growth in the first quarter.
The pound rose by 0.7 per cent against the US dollar to $1.297 as a closely watched survey indicated the joint fastest expansion of private sector output since September 2018.
The flash IHS Markit/CIPS purchasing managers’ index (PMI) combined reading of manufacturing and services output, representing about 10 per cent and 80 per cent of GDP respectively, beat expectations to match January’s 53.3. A reading above 50 means expansion. Manufacturing climbed from 50 to 51.9.
Businesses cited “receding political uncertainty” and a greater willingness to spend among clients, despite some orders in Asia being cancelled due to the coronavirus outbreak. Stronger demand was reported from the US and Europe.
Expectations for output growth this year are at their highest for five years and staffing numbers picked up for the third month running.
Tim Moore, associate director at IHS Markit, said: “The recent return to growth provides a clear indication that the UK economy is no longer flat on its back.”
The survey signalled 0.2 per cent GDP growth in the first quarter after the economy stagnated in the last three months of 2019.
Investec’s Phil Shaw said: “The PMIs are helping to confirm other survey and anecdotal evidence that the ‘Boris bounce’ is more than a flash in the pan.”
Howard Archer, chief economic adviser to the EY Item Club, said: “The survey indicates manufacturing and services are continuing to benefit from an improvement willingness by businesses to spend as a result of reduced uncertainties following December’s election.”