Britain's manufacturing sector contracted by the narrowest of margins in April and much less than expected. Here's how economists reacted to the data.
Rob Wood, Berenberg Bank
I don't think the UK can buck the global trend for long. Manufacturing will struggle to grow for a while yet. It's obviously good news it (the PMI) has gone up, but the sector continues to flirt with contraction. The UK's main trading partner, the euro zone, remains in recession and, whilst exports to other countries are rising, the euro zone does after all still account for 50 percent of UK trade.
The manufacturing sector will probably weigh on UK growth for a couple of quarters and we think there will be some difficult times to come before Britain returns to sustainable growth, but the relief is that the rate of contraction has at least eased.
Stephen Gifford, CBI
These figures echo our own survey, showing signs of stabilisation in the manufacturing sector, with companies expecting a pick-up in business over the next few months.
Boosting manufacturing exports is crucial to the strength of the sector so we want the Government to introduce a tax incentive for small and medium-sized exporters to give them a leg up into new markets.”
Howard Archer, IHS Global Insight
Despite the headline reading showing marginal contraction in manufacturing activity in April, the purchasing managers’ survey shows some modestly positive developments that lift hopes that the sector can return to growth, albeit likely modest, in the second quarter after reportedly contracting by a further 0.3% quarter-on-quarter in the first quarter following a pretty torrid 2012.
Meanwhile, following the 0.3% GDP growth in the first quarter, the improved manufacturing PMI further eases pressure on the Bank of England to go for more Quantitative Easing as soon as the MPC’s May meeting next week. We think more QE will eventually occur, but maybe not until Mark Carney tales over as Governor in July.
Philip Shaw, Investec
It's a relatively decent result. The manufacturing sector is still weak - the PMI remains below the 50 breakeven level - but there is some semblance of stabilisation, which could imply a gentle building of recovery momentum across the economy.
Rob Dawson, Markit Economics:
It is welcome to see the sector showing signs of stabilising in April. With forward-looking indicators such as new orders and the demand-to-inventory ratio also ticking higher, the sector should at least be less of a drag on broader GDP growth in the second quarter.
Manufacturers report that the domestic market is just about holding its head above water, but was still a key cause of disappointingly weak demand, while a solid improvement in new export orders was the real surprise.
April also saw a further easing in price pressures, as input costs fell and selling prices rose at the weakest pace since last November (Xetra: A0Z24E - news) . This provides headroom for the Bank of England's MPC (KOSDAQ: 050540.KQ - news) to extend its accommodative policy stance if GDP growth fails to gain traction in the coming months.
Edited for telegraph.co.uk by Szu Ping Chan