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Manufacturing Sector Growth Index Indicates Reversal Of Slow Growth In British Economy

Manufacturing Sector Growth Index Indicates Reversal Of Slow Growth In British Economy
Data from the manufacturing sector of the United Kingdom suggests that there could be a reversal in the poor performance of the British economy during the first quarter of the current fiscal year. the data was released on Friday.
A strong performance in the second quarter is being put in by the manufacturing sector in the economy as suggested by Markit/CIPS manufacturing sector survey for May. While a consensus estimates among experts and analysts were expecting a fall in the purchasing managers' index (PMI) for May, it beat estimates. The PMI recorded an increase to 54.4 point from 53.9 points a month earlier. A figure of more than 50 points indicates possibility of growth.
The export order balance picked up from 53.4 to 54.2 for May and analysts said that the ongoing increase in global demand for goods and the 20 per cent drop in the sterling because of market uncertainties after the Brexit referendum were the driving force behind the good performance.  
Compared to the index figures for the entire of 2017, the overall average is not just a touch below what was achieved in the previous year. there was an increase in the output index according to the published data and it rose from 55.4 to 56.9 which was in conformation to the quarterly growth of 1 per cent in May for the entire economy.
This means a 0.1 per cent overall boost to the economic growth figures which is an increase of half on the almost-stagnant growth in the economy of 0.2 percent that was visible in the revised official figures for the economy released last week.
Ruth Gregory, British economist at Capital Economics, a financial data firm, said: "The sector is putting in a strong performance in Q2, after the poor start to the year."
"Alongside the signs that a revival in the consumer sector is underway; the figures provide us with reassurance that the weakness in GDP growth in the first quarter should prove temporary."
The data also however indicates a number of headwinds.
The amount of work that remained unfinished with the manufacturing sector was smaller, noted Gregory, there was a sharp rise in the stocks of finished goods which "suggested there is no real pressure on firms to increase output in the near term."
Additionally, the recent rise in the global oil prices has also put pressure on the input prices balance which also noted an increase from 62.5 to 65.
"This will clearly put more pressure on firms to raise their output prices which could dampen demand for manufacturing goods ahead," she said.

Christopher J. Mitchell

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