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Weak UK Manufacturing Data Point To More QE: IHS Global Insight

The disappointing British purchasing managers' survey for April shows that the Bank of England may announce additional quantitative easing (QE) at this month's meeting, Howard Archer, chief European and UK economist at IHS Global Insight, said in a note Tuesday.

According to the economist, the weaker-than expected purchasing managers' data has dampened hope that the economy will return to growth in the second quarter.

Data from the survey indicate that the British manufacturing sector currently faces major challenges that are limiting its performance and at least its near-term prospects, as the Eurozone contraction and soft activity elsewhere continue to hurt exports and the squeeze on consumers' purchasing power and tighter public spending weigh down on domestic demand.

Also, the recent spike in input costs on the back of higher oil prices squeezes manufacturers' margins and exerts pressure on them to raise prices at a time when demand is fragile. Higher output prices reinforce concern that consumer price inflation will be sticky for an extended period, the economist noted.

IHS Global Insight observed that April's weak manufacturing activity, which slowed to near-stagnation, supports recent data that showed a marginal manufacturing contraction of 0.1 percent in the first quarter.

Data compiled by Markit Economics today showed that the British manufacturing sector expanded at a significantly slow pace in April. Output growth weakened to the lowest level so far this year. Export orders contracted at the sharpest rate since May 2009, while backlogs of work fell sharply. On the positive side, employment in the manufacturing sector edged up for a fourth month running in April.

by RTT Staff Writer

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