UK manufacturing expands at slowest pace in 17 months in April

The weak Purchasing Managers’ Index reading follows last week’s official estimate that the sector slowed dramatically in the three months to March

Confidence among manufacturers has fallen to its weakest level in five months (Reuters)

Manufacturing slowed by more than expected in April – raising further fears about the strength of the UK economy.

The latest Purchasing Managers’ Index (PMI) survey came in at 53.9, a 17 month low.

Any reading above 50 signals expansion, but this was down from 55.1 in March and below the 54.8 prediction of City analysts.

“It appears the disappointing start to the year is set to continue in the second quarter, with weaker than anticipated economic conditions and the pound falling again,” said Duncan Brock of the Chartered Institute of Procurement & Supply, which sponsors the PMI survey.

The report, compiled by IHS Markit, also showed that business confidence among manufacturers has fallen to its weakest level in five months, with firms citing concerns about Brexit and possible future trade barriers.

The growth of new export business was at its lowest in 10 months, and job creation the feeblest in 14 months.

Manufacturing accounts for 10 per cent of UK GDP, and the Office for National Statistics (ONS) estimated last week that the sector slowed dramatically in the three months to March, expanding by just 0.2 per cent, after booming in the second half of 2017, which was helped by the weaker pound.

Weakest since November 2016

The ONS estimated that the UK’s overall GDP growth slumped to 0.1 per cent in the quarter, raising concerns that the economy is now virtually stagnating.

The pound, which fell sharply after last week’s GDP figures, slipped further on Tuesday as traders pulled back their bets on the Bank of England’s Monetary Policy Committee (MPC) raising interest rates at its next meeting on 10 May.

Sterling was down 0.58 per cent on the day against the dollar, at $1.3688, in the wake of the figures.

“Markit’s manufacturing survey provides more evidence that the economy has fundamentally slowed this year, strengthening the case even more for the MPC to hold back from raising interest rates later this month,” said Samuel Tombs of Pantheon.

In a separate indication that consumer sentiment might also be weakening, the Bank of England on Tuesday reported a drop in the number of mortgage approvals in March, to 62,914.

This was below the 64,544 average for the previous six months, although the weather is likely to have played a role in depressing activity.

The annual rate of borrowing growth also dipped to 8.8 per cent, from 9.5 per cent previously.