UK manufacturing growth in January eases recession fears

Fri Feb 1, 2013 6:08am EST
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By Olesya Dmitracova

LONDON (Reuters) - Britain's manufacturing sector again expanded modestly in January, raising hopes the economy can avoid a new recession, although activity grew less than a month before and was below expectations.

Factory output, however, grew at the fastest pace since September 2011, the survey published on Friday showed. Lower factory output was a key reason for a contraction in the last quarter of 2012 which left Britain's economy within sight of its third recession in four years.

The Markit/CIPS Manufacturing Purchasing Managers' Index (PMI) inched down to 50.8 from a downwardly revised 51.2 in December. That was just short of forecasts for a reading of 51.0 but for a second month running was above the 50 level that separates growth from contraction.

"Broadly the findings argue against the UK going into a triple-dip recession, and ... offer hope that a more sustainable recovery might be in train," said Philip Shaw, economist at Investec.

Others were more cautious, noting that new orders hardly grew, tempering optimism about the first quarter of 2013.

Rob Dobson, the Markit economist who compiled the survey, said the wider impact of manufacturing's January expansion would be limited as the sector accounts for only about 10 percent of the economy.

"The survey will do little to assuage fears of a triple-dip recession unless accompanied by an improvement in the services sector," he said. Markit's January services sector PMI will be published on Tuesday.

OUTPUT JUMPS   Continued...

Employees of JJ Churchill precision engineering polish turbine blades in the company's factory in Market Bosworth, central England, October 10, 2012. REUTERS/Tom Bergin