Manufacturing gap widens between UK and eurozone

Published on Tuesday 4 April 2006 01:24

BRITAIN'S manufacturers suffered another troubled month in March, with the gap between the growth of manufacturing orders here and continental Europe widening sharply.

The growth in UK orders fell for the second straight month to its worst since last August, while the same measure for the eurozone hit a near-six-year high.

The UK's Purchasing Managers' Index (PMI), which is co-produced by the Royal Bank of Scotland, dropped to 50.8 in March from 51.5 in February, which itself was revised down from an original 51.7. Analysts had expected a rise to 52.

A similar measure of Eurozone activity jumped 1.6 to a five-and-a-half-year best of 56.1. Analysts had predicted a more modest rise to 55.

Geoff Dicks, economist at RBS, said: "After the very strong performance in the euro area, the UK was, yet again, a disappointment."

He said the detail in the figures reinforces the view that UK manufacturers choose higher prices and lower output in the face of rising cost pressures.

George Buckley, chief UK economist at Deutsche Bank, added the last time the gap between the eurozone and UK was as large this was late 2000. He said the figures indicated that the manufacturing recovery was temporary. In the three months to the end of January output has risen by 1 per cent, insufficient to compensate for the near-2 per cent decline in the three months to October.

Most analysts said the manufacturing figures will do little to alter the view of the Bank of England to keep rates on hold on Thursday.