LONDON (Reuters) - Growth in British manufacturing unexpectedly eased to its slowest pace in eight months in March and prices paid by factories tumbled, a survey showed on Tuesday.
The Markit/CIPS Manufacturing Purchasing Managers’ Index (PMI) fell in March to 55.3, its lowest since July last year and below all forecasts in a Reuters poll of economists.
February’s reading was sharply cut to 56.2 from an originally reported 56.9. It was the fourth month in a row that the index fell although it remained comfortably above the 50 mark that denotes growth.
In another reminder of strength in the sector, the pace of hiring, which in February hit a 33-month high, faded only slightly through March.
Survey compiler Markit said the slower growth in the sector was mainly centred on companies that make machinery and equipment.
Rob Dobson, senior economist at Markit, said the latest reading would likely disappoint investors but should be seen in the context of near record growth rates seen in the second half of 2013.
“Growth is merely hot rather than scorching, and the take-home messages from the March survey are that the recovery remains solid and continues to drive strong job creation,” Dobson said.
British inflation hit a new four-year low in February and the latest PMI showed price pressures in manufacturing - which accounts for around a 10th of Britain’s economy - weakened further in March.
Lower commodity and energy prices prompted the first fall in factories’ purchasing costs since August 2012, while prices charged by manufacturers for finished products rose at the weakest pace in seven months.
“The Bank of England ... will most likely read this combination of slower but sustained output growth and muted price trends at manufacturers as in line with maintaining their current monetary policy stance,” said Dobson.
Consumer spending and a pick-up in the housing market have led the economic recovery, but the BoE has said more business investment and exports are needed to sustain it.
While there have been signs of a pick-up in business investment recently, the PMI’s new export orders index fell to its lowest level since last May, as some companies reported smaller amounts of new work from the Asia-Pacific region.
Reporting by Andy Bruce; Editing by Toby Chopra