Men work on the production line at the London Taxi Company in Coventry, central England, September 11, 2013.
British factories had their best month in three years in April, the clearest sign yet that manufacturers are enjoying at least a temporary boost from the pound’s fall after the Brexit vote and an improving global economy, a survey showed on Tuesday.
The Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) jumped to 57.3 from 54.2 in March, exceeding all forecasts in a Reuters poll of economists which had predicted a slight fall.
The figures echoed a string of upbeat economic news from the euro zone, the biggest export market for British manufacturers, and may be a small boon for Prime Minister Theresa May ahead of the June 8 national election.
In contrast to signs of weakening consumer demand at home as inflation rises quickly, new factory orders poured in at the fastest rate since January 2014, while growth in orders from abroad was at a seven-month high, the PMI showed.
"This is better news for the UK economy, after a very gloomy end to last week," said HSBC economist Elizabeth Martins.
Data last Friday showed gross domestic product expanded just 0.3 percent in the first three months of the 2017.
"However, we hesitate to get too excited. (Even) if the manufacturing and export upswing seen in H2 2016 does have further to run, these are not the key drivers for the UK economy more widely," Martins added.
Sterling received only a temporary lift from the PMI figures after hitting a seven-month high against the U.S. dollar on Friday. Traders were more focused on media reports that the European Union is taking a tough stance on Britain’s exit from the bloc. [GBP/]
The pound’s recent recovery could limit further growth in export orders but should also ease cost pressures for manufacturers. Growth in input costs cooled further in April after increasing at a record pace earlier this year.
That will be welcome news for Bank of England officials who are due to meet next week to set interest rates. Some policymakers are uneasy about the risk of inflation becoming entrenched in the economy.
Rob Dobson, economist at PMI compiler Markit, questioned whether April’s growth spurt for manufacturing could be sustained as elections at home and abroad feed uncertainty in the months ahead.
"Other surges seen since the middle of last year have generally proved short-lived, as weak wage growth sapped consumer spending," he said.
Britain’s official measure of manufacturing has been uneven, with quarterly growth slowing to 0.5 percent in the three months to March, according to data on Friday while the year-on-year growth rate of 2.8 percent was the strongest since late 2014.
BoE Deputy Governor Ben Broadbent said in March the current "sweet spot" for manufacturers might not last because Brexit negotiations could result in less access to the EU’s single market, while a generous deal would push up the value of sterling.
(Editing by William Schomberg and Catherine Evans)