Underlying demand remains weak and growth in the manufacturing sector is likely to slow in the months ahead - ITEM Club

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Nida Ali, economic advisor to the EY ITEM Club, comments on today’s PMI manufacturing figures:

  • Despite a decline in the headline balance, a reading above the 50.0 mark provides a crumb of comfort
  • Underlying demand remains weak and growth in the sector is likely to slow in the months ahead 
  • The struggle for UK manufacturers is likely to continue but today's figures imply that a technical recession will probably be avoided

“Any hopes for a further improvement in the manufacturing PMI, on top of last month's high, would have been optimistic. Given the numerous headwinds buffeting the sector, the continued expansion of output in February provides a crumb of comfort.
“With new orders remaining broadly unchanged, while production was largely supported by clearing out backlogs of work, there is clear evidence that underlying demand is weak. Against this backdrop, we would expect growth in the sector to slow in the coming months.
“UK manufacturers' fate is closely tied to developments in the Eurozone and the survey reports that demand from Europe declined. The ongoing Eurozone debt crisis continues to pose a significant downside risk to the sector, and the struggle for manufacturers is far from over.
“However today's figures make the chances of a technical recession now lower than ever, and GDP growth will probably post a small positive in Q1.”