LATEST snapshots on UK manufacturing and services surprised markets on the downside yesterday. But there was better news from the eurozone with survey evidence pointing to a full-blown recovery.
The UK data coincided with the Monetary Policy Committee meeting on interest rates. While it is likely to keep rates unchanged when it votes today, the evidence suggests overall growth in Q1 may not have been as robust as some had hoped.
February
's manufacturing output recorded an unexpected drop of 0.2 per cent, compared with market expectations of a 0.2 per cent rise. Despite this decline - and a downward revision in the January figure to 0.1 per cent - manufacturing output over the latest three months is now reckoned to have grown 0.4 per cent, picking up from a weak performance in 2005Q4 when output fell by 1.1 per cent.
On a longer term comparison the picture does not look good, with the level of manufacturing output is still slightly below that for the start of 2000.
Industrial output overall in February fell 0.3 per cent, suggesting growth over the quarter of 0.8 per cent, against hopes of growth above 1 per cent.
The much-watched Purchasing Managers business activity Index for the services sector dropped from 58.9 in February to 57.4 last month. Business expectations fell from 74.3 to 72.9, the lowest since November.
Royal Bank of Scotland chief economist Andrew McLaughlin said: "Overall growth in the first quarter has been the sharpest since mid 2004." But he added that "divergent trends at the sector level are becoming increasingly apparent ... Those sectors closely linked to personal consumption trends are faring less well."
The latest eurozone Purchasing Managers Index from Royal Bank of Scotland and NTC shows private sector output hit a five-and-a-half-year high . Kevin Gaynor of RBS, said: "This looks increasingly like a full-blown recovery."
