UK Manufacturing Weakens but Consumer Spending Still Rising

Hopes that Britain’s economic recovery will become less reliant on big-spending consumers ebbed further on Friday as data showed manufacturing growth weakened at the end of last year while lending to individuals soared.

Sterling hit a 16-month low after the Markit/CIPS UK Manufacturing Purchasing Managers’ Index, a closely-watched monthly business survey, hit a three-month low in December, missing all forecasts in a Reuters poll.

Separate data from the Bank of England showed lending to consumers surged at its fastest rate in nearly a decade in the three months to November, and business lending showed signs of picking up despite a slowing housing market.

Taken together, the figures suggested Britain’s upturn — one of the strongest among advanced economies in 2014 — will remain biased towards consumption rather than other sources of growth such as investment and exports.

With a national election due in May in which the economy will take center stage, signs of weaker manufacturing growth may concern finance minister George Osborne.

“This morning’s UK data releases show that the long hoped-for economic rebalancing story is not playing out as envisaged,” said James Knightley, economist at ING.

“With employment and real household disposable income set to rise robustly in 2015 consumer spending looks set to become the UK’s main growth engine once again.”

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency
trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza