THE growth rate of the UK manufacturing sector fell sharply in February, with tentative warnings from some firms about the detrimental impact of sterling's strength against the dollar on exports, a key survey showed yesterday.
Nevertheless, the pace of expansion remained relatively robust by historical standards, and economists warned that the main problem would be if growth were hit further.
The Chartered Institute of Purchasing and Supply reported yesterday that its purchasing managers' index for manufacturing, which provides a composite measure of the sector's activity and is traditionally the first economic indicator of the month, fell from 55.8 to 53.2 on a seasonally-adjusted basis.
Although output, total new orders, and export business continued to grow, they all did so at a slower rate, and this dragged the composite index lower.
The fall in the manufacturing growth rate is another factor to support the view of most economists that Mervyn King, the Bank of England governor, and his monetary policy committee will hold UK base rates at 4% at the conclusion of their latest two-day monthly rate-setting meeting on Thursday.
The City's best guess is that the bank will not raise rates again until May - the month of its next quarterly inflation report.
At 53.2, the manufacturing PMI is still comfortably higher than the level of 50 which
separates expansion from contraction, and it did signal the eighth consecutive month of growth.
Paul Dales, UK economist at Capital Economics, said: ''The growth rates were too high in the past six months. If it stays here, it seems to be consistent with a decent pick-up in
manufacturing output at the moment.''
Dales believed the problems would come were sterling to continue to rise, resulting eventually in a fall in export orders and further drops in the overall PMI.
The latest CIPS survey painted a mixed picture of the impact of the pound's dramatic ascent since September against the embattled dollar.
Reporting on new export business, survey respondents identified Asia as a key growth market in February.
There were also reports that new orders from the fast-growing US economy had remained a key contributor to rising new exports, but some firms indicated that the strength of sterling had hampered demand from dollar markets.
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