- Martin Beck, senior economic adviser to the EY Item Club
Activity in Britain's manufacturing sector rose at the slowest pace in 14 months in August as geopolitical crisis in Ukraine curtailed demand from abroad, reawakening concerns about the balance of economic recovery in the country. The Markit/CIPC UK Manufacturing PMI declined to 52.5 compared to July's downwardly revised figure of 54.8. However, the sector continues to grow as the index stayed above the 50-point threshold, which separates contraction from expansion. According to Markit, slowdown appeared to be broad based with new jobs, export orders and new business weakening. The new orders component dropped to its lowest level since April 2013 at 52.9, down from 56.8 in July in its biggest one-month slump for two years. Factories also hired staff at the slowest pace since June 2013. Nevertheless, the pace of expansion in British manufacturing remained above its long-term average. A separate report from the Bank of England revealed a sharp increase in consumer credit by 1.1 billion pounds in July. Taken together, the data underlined the U.K.'s reliance on big-spending consumers to fuel its economic recovery.
Meanwhile, a survey of almost 300 companies by the EEF manufacturers' organisation showed a continued positive picture with ongoing plans to invest in machinery and recruit skilled employees.
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