Financial News

  • 4 March 2014, 10:41

UK Economy: Manufacturing And Mortgage Boost

There is some hope that the UK's economic recovery is starting to broaden out as manufacturing activity accelerates.

The latest Markit/CIPS manufacturing Purchasing Managers' Index (PMI) showed job creation at a 33-month high and better-than-forecast output though export orders slowed - blamed on the recent rise in the strength of the pound.

The data for February was released as separate reports on the economy showed the highest number of mortgage approvals in January since November 2007 - before the financial crisis - with 76,947 loans granted.

But while the housing market recovery continued to gather steam, the Bank of England also reported further falls in lending to businesses despite the Funding for Lending Scheme (FLS) now being solely focussed on supporting firms.

The Bank stopped allowing FLS cash, which is drawn by banks, to be used for mortgages at the start of the year because separate Government schemes to boost mortgage lending, including Help to Buy, were already underpinning the market.

It was the manufacturing report which stood out amid pressure on the Government to rebalance the UK economy away from its reliance on strong consumer spending.

The PMI, where readings above 50 point to growth in activity, came in at 55.4 in February from 54.1 the previous month but below November's near three-year high of 58.1.

Amid reports that manufacturers are starting to bring production back home, the Chancellor George Osborne has confirmed plans to aid investment and exporters in his March 19 Budget statement.

Senior economist at Markit, Rob Dobson, said: "This mini-renaissance in manufacturing is also driving the sharpest job creation since the middle of 2011, which will support the broader economic recovery through improved consumer confidence and spending."

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