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Last updated: May 2, 2013 12:11 am
Tentative signs of a pick-up in manufacturing exports emerged on Wednesday after a poll of purchasing managers showed new orders from overseas at their highest level in 18 months.
The UK’s policy makers have pinned their hopes on a rebalancing of the economy towards a greater reliance on manufacturing exports to spur a recovery. Much to the disappointment of George Osborne, chancellor, and Sir Mervyn King, Bank of England governor, a “march of the makers” has eluded Britain, as has meaningful economic growth, despite the pound losing a fifth of its value since the start of the crisis.
The National Institute of Economic Research, a think-tank, will say on Thursday that export volumes will fall 1 per cent during 2013, after last year’s decline of 0.2 per cent, largely because of declines in services sold overseas.
However, some hope of a rise in manufacturing exports was offered on Wednesday after the purchasing managers’ index rose to a four-month high of 49.8 in April, up from 48.6 in March and just below the 50 mark that separates contraction from expansion.
The jump in the reading for new export orders, from 48.9 to 52.6, was the biggest since July 2011. Rob Dobson, a senior economist at Markit, which compiles the data with the Chartered Institute of Purchasing & Supply, a trade body, said the solid improvement in orders from overseas was “the real surprise”.
Despite the PMI data, the picture of the economy is far from conclusive. However, a rise in new export orders from outside the eurozone will encourage Mr Osborne and Sir Mervyn, who have often blamed the crisis in the bloc, which is Britain’s largest export partner, for the failure to rebalance.
The PMI data showed purchasing managers reported a rise in interest in UK goods from North America, Latin America, the Middle East and Australia. But, despite relatively high growth in some of those regions, export trade could continue to shrink until the eurozone economy recovers.
The International Monetary Fund expects the eurozone economy to shrink 0.3 per cent this year. Although Niesr expects the UK to export more to non-EU countries in the coming years, trade would continue to shrink until growth in the currency bloc resumed.
“We do expect export growth to pick up significantly as growth resumes in the euro area. Export growth is forecast to contribute more than 1 percentage point to GDP [gross domestic product] growth, on average, over the period 2014 to 2017,” the think-tank said.
Separately, Niesr forecast on Thursday that the UK economy would grow 0.9 per cent this year and 1.5 per cent in 2014.
The think-tank warned that, despite the avoidance of a triple-dip recession, the economy remained weak.
“Much of the attention focused on the avoidance of a ‘triple-dip’, rather than another quarter of relatively weak economic growth . . . As we have noted many times before, obsessing about a couple of quarters of minute falls in output distracts us from the clear trend: that of a stagnating economy,” Niesr said.
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