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UK manufacturing data disappointing, says forecasting group

Last updated: 23:40 02 Jan 2015 AEDT, First published: 00:40 03 Jan 2015 AEDT

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The latest official UK manufacturing data is 'disappointing' and shows a stagnation in export sales, according to the independent forEcasting group, the EY ITEM Club.

The group produces quarterly economic forecasts and is sponsored by EY (Ernst & Young).

UK manufacturing accounts for around 10% of economic output, and the CIPS/Markit survey of purchasing managers fell to a three month low last month (December).

It was 52.5 in December, down from 53.3 in October and November, however a figure over 50 is counted as expansion.

Domestic demand is driving new orders rather than exports, which is a blow to the government's bid to rebalance the books, since exports are key to the plan.

Martin Beck, advisor at the EY ITEM Club, said: "December’s CIPS manufacturing survey is disappointing, with the survey’s PMI recording its second lowest reading in 18 months and continuing a fairly consistent downward trend. 

"External weakness was once again the culprit, with the survey pointing to export sales stagnating and output growth being held up by domestic demand. 

“Despite the headline PMI remaining above the 50 ‘no-change’ mark, December’s fall was a touch disappointing given the more positive results of other manufacturing surveys."

He added: “Looking forward, the prospect of faster growth in the global economy should reduce the recent divergence in domestic versus overseas sales performance. 

"But boosting overseas sales could continue to remain challenging, not least if recent political turmoil in Greece triggers a resurgence of crisis in the euro-zone."

Beck also highlighted the waning demand for mortgages and increase in consumer credit after a separate report today from the Bank of England showed lending to consumers surged in the three months to November.

“... the household borrowing numbers for November showed that faltering demand for house purchases continues to be reflected in a declining appetite for mortgages," he said.

"The fall in mortgage approvals was the fifth successive monthly drop and took approvals to their lowest level since June 2013. 

"Moreover, net mortgage lending was only modestly up on a year earlier, pointing to continued deleveraging by households. That said, annual growth in  consumer credit rose to a rate reminiscent of the credit-fuelled days of the mid-2000s.”

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