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Manufacturing growth fades further

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Date: Thursday 01 May 2008

LONDON (ShareCast) - The UK’s manufacturing sector held up a little better than expected in April, although growth slowed from the previous month and prices soared at their fastest rate ever.

The Chartered Institute for Purchasing and Supply (CIPS) said its monthly purchasing managers index eased to 51 last month from 51.3 in March, not as bad as the predicted slip to 50.8.

But the latest read, the second weakest in two years, takes it nearer to the 50 level which represents the tipping point between expansion and contraction.

The Bank of England, struggling to keep inflation under control, is likely to raise an eyebrow at the figures, which revealed a surge in the output price index to 61.9 from 60.6, another series high.

Meanwhile, the input price number of 78.5 was the highest in 13 years, up from 76.37 in March as the cost of imported raw materials leapt on sterling’s weakness against the euro.

Some analysts reckon the weak data could be enough to convince the central bank to chop rates by another quarter point next week. Borrowing costs have fallen three times in the last five months following April’s 25 basis point reduction.

Minutes from the last Monetary Policy Committee, released last week, showed members voted 6-3 to cut rates, with Bank of England governor Mervyn King in favour.