UK PMI Manufacturing drops to 54.6 in April as Domestic Demand declines

The British Manufacturing Sector saw growth unexpectedly fall to 54.6 in April; a decline which the report’s authors have attributed to shrinking domestic demand. The data; which was released earlier today by Markit Economics and the Chartered Institute for Purchasing & Supply; had been expected to show minor growth to around 56.9 from a downwardly revised figure of 56.7 in March.

Despite the decline, the index remains about the 50.0 level; the point at which contraction becomes expansion. Indeed, April’s figure represents the 21 consecutive month in which the British manufacturing sector has recorded growth. Coupled with both weakness in the British pound and strong export demand, the manufacturing sector has still managed to record growth of 1.1% in the first Quarter.

Despite the optimism, inflation remains high. Output Prices of 65.2 in March; the highest on record; did record a small fall to 64.2 in April. This latest figure means that output prices remain at near record highs. With last week’s UK GDP data showing measly economic growth of only 0.5% in the first Quarter; following declines of 0.5% in Q4 of 2010; the Bank of England remains under pressure find an appropriate solution for tackling inflation whilst protecting the stability of the British Economy.

At the same time, Markit Economics Senior Economist Rob Dobson has warned that any strength within the sector is unlikely to last. Citing Government spending cuts, tax rises and tighter incomes, Dobson suggested that “the manufacturing growth spurt looks to be fading rapidly.” Suggesting that “the outlook has deteriorated sharply, with new orders growth having collapsed from a booming pace at the start of the year to only registering a weak influx of new business in April,” Dobson has warned that British manufacturers are finding themselves increasingly reliant upon international demand, as demand within the UK continues to decline.