U.K. Manufacturing Growth Unexpectedly Slows as New Orders Ebb

(Bloomberg) -- U.K. manufacturing expanded the least in seven months in January and input prices saw a “marked acceleration.”

IHS Markit’s Purchasing Managers Index for the industry fell to 55.3 last month from 56.2 in December, it said Thursday. That defied economists’ forecasts for an increase to 56.5.

The survey showed growth in new orders eased to the lowest since June. Cost pressures are also intensifying, with purchase prices gaining at the fastest rate in almost a year.

“The U.K. manufacturing sector reported an unwelcome combination of slower growth and rising prices at the start of 2018,” said Rob Dobson, director at IHS Markit. “The trend in demand will need to strengthen in the near-term to prevent further growth momentum being lost.”

Despite the decline in the headline index, it remains well above the long-term average of 51.7, according to Markit. It’s also comfortably above 50, signifying expansion. Manufacturing, which makes up about 10 percent of the U.K. economy, continues to be boosted by the fall in the pound since the Brexit vote.

January’s survey showed a pick-up in foreign demand, amid increased sales to North America, China, mainland Europe, the Middle East and Japan. Companies also remain positive, with more than half forecasting production to be higher a year from now.

Markit is due to release a similar index for the construction industry on Friday. It will report on the U.K.’s dominant services sector next week.

The surveys will be among the last major data points before the Bank of England updates its economic forecasts on Feb. 8. Central bank officials increased interest rates for the first time in a decade in November, partly to help combat an inflation rate that’s running well above their 2 percent target.

--With assistance from Mark Evans and Harumi Ichikura

To contact the reporter on this story: David Goodman in London at dgoodman28@bloomberg.net.

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Brian Swint

©2018 Bloomberg L.P.