Roundup: British manufacturing PMI rises to 9-month high, inflation increases

The British manufacturing purchasing managers' index (PMI), a gauge of industry activity, edged up to 54.1 in February 2015 from the revised 53.0 in January 2015, registering a nine-month high of the reading, said Markit Economics Limited Monday.

Analysts said waning inflation and its effects on the industry as well as on the economy is becoming the focal point these months. They believe the central bank of Britain might delay its first rate rise to early next year.

JOB CREATION

The data was above the market estimates consensus of 53.3, and it has remained above the neutral 50.0 mark every month since April 2013. A figure above 50 suggests that the sector is growing.

The growth rate of British manufacturing sector continued to strengthen at the start of 2015, leading to further job creation, said the London-based market researcher.

Growth was led by the consumer goods industry, although solid expansions in output were also registered at intermediate and investment goods producers, said Markit.

Manufacturers reported a further improvement in new order inflows during February, underpinned by rising volumes of new business from domestic based clients.

In contrast, export performance deteriorated for the fourth time in the past five months, reflecting subdued conditions in key markets and the sterling exchange rate, data showed.

The rate of jobs growth accelerated to a three-month high, and average purchases prices fell at a substantial pace that was slightly less marked than January's 68-month record, figures also showed.

INPUT PRICE SLUMP

Rob Dobson, senior economist at Markit, said in a press release: "The slump in oil prices earlier in 2015 is still filtering through on the cost side, meaning manufacturers' input prices are falling at a double-digit annual pace."

"Although a welcome respite for margins, lower costs are being partly passed on in the form of reduced selling prices, adding to short-term deflationary pressures in the economy," he said.

Market research estimates that the Bank of England will push back the first rate increase until next year, as waning inflation providing leeway on policy rate adjustment.

Andrew Goodwin, senior economic adviser to the EY ITEM Club, commented: "The domestic economy is clearly showing the benefits of cheaper oil, which is not only helping to boost demand but is also allowing firms to both reduce prices and build margins. The recent appreciation of the sterling against the euro will also be helping in this regard by pushing down import prices."

"However, exchange rate movements do represent something of a double-edged sword, with the loss of competitiveness negating any benefits of stronger activity in the euro zone," he noted.

Goodwin stated the combination of accelerating growth and low inflation means that there is no pressure to change monetary policy settings any time soon. Endit