The continuing downturn in the U.K. manufacturing sector have reignited fears of a triple-dip recession amid lackluster demand from both domestic and foreign markets. Further, mortgage approvals declined again in February, reflecting no credible support from the Funding for Lending Scheme to the housing market.
The headline purchasing managers' index rose less-than-expected to 48.3 in March from February's four-month low of 47.9, a survey by Markit Economics and the Chartered Institute of Purchasing & Supply showed Tuesday. Economists expected the reading to rise to 49.
A PMI reading above 50 indicates expansion of the sector, while a reading below 50 suggests contraction. The average reading for the first quarter as a whole was 49, which was also slightly below the neutral level.
Production fell at the steepest pace since October last year, whereas the rate of contraction in new business eased marginally since the previous month. Tough market conditions and subdued client confidence were the factors that pulled down production.
Incoming new export orders contracted for the fifteenth month running in March, on weak demand from Europe and strong competition in South Asia, Markit said.
Furthermore, employment at manufacturing firms fell for an eighth consecutive month, mirroring company restructuring and redundancies. Job cuts were mainly focused on larger manufacturers.
On the price front, the survey showed another increase in overall input costs. Part of the increase in costs was passed on to clients in the form of higher selling prices.
Manufacturers remained on a cost cautious footing during March, as highlighted by a further scaling back of purchasing activity and further disinvestment of inventories.
"These weak numbers may be sufficient to tip the balance and convince more members of the Monetary Policy Committee to consider additional easing at their next meeting," Rob Dobson, senior economist at survey compilers Markit said.
The Monetary Policy Committee is set to hold the latest rate-setting session on Thursday.
Elsewhere, the Bank of England data showed that the number of mortgage approvals declined to 51,653 in February, from 54,187 in January. It was forecast to fall to 53,500 in February.
Data provides further evidence that poor fundamentals are outweighing government efforts to support the housing market, Matthew Pointon, a property economist at Capital Economics observed.
However, the latest survey from the Nationwide Building Society showed that house prices rose for the first time in thirteen months in March, underpinned by strong demand. Property prices were up 0.8 percent from a year ago.
In his budget speech last month, Chancellor George Osborne announced measures including mortgage guarantee to support prospective homebuyers.
Net mortgage lending increased GBP 866 million compared to GBP 287 million in January, the central bank said. The increase in consumer credit came in at GBP 0.6 billion, larger than the GBP 0.4 billion increase forecast by economists.
Another report from the bank showed that M4 money supply dropped 0.5 percent in February from a month ago, when it rose 0.9 percent. On a yearly basis, it climbed 0.5 percent.
by RTT Staff Writer
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