Manufacturing and household borrowing data consistent with some cooling in economic growth - EY ITEM Club comments

1 March 2017

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  • Growth in manufacturing activity eases in February
  • While household borrowing numbers see little change
  • Data is consistent with some cooling in economic growth

Martin Beck, senior economic advisor to the EY ITEM Club, comments:

“Manufacturing and household borrowing data were consistent with growth in the economy cooling compared to the firm rates seen in the second half of last year.

“The CIPS manufacturing survey reported a drop in the headline PMI from 55.7 in January to 54.6 in February pointing to a slowdown in the mini-surge in output growth around the turn of the year. While the survey points to a better manufacturing performance than much of the past couple of years, the relatively small size of the sector means that it is unlikely to be sufficient to offset the drag from weaker growth in consumer-facing sectors.

“January’s Money & Credit release was consistent with the notion of a softer performance from consumers. Net unsecured lending recovered from December’s nineteen-month low of £1b, but lending of £1.4b fell someway short of the £1.6b averaged over the past six months. This chimes in with the evidence of a step-down in sales on the high street and raises questions over the MPC’s view that consumers will continue to borrow more or save less in order to offset the pressures from higher inflation.

“Mortgage activity was a little firmer, with approvals continuing to edge upwards, but the wider context shows a market where activity has not changed materially compared with the underlying trend of the past couple of years.”