Factory Data, High Prices May Hinder U.K. Rate Cut

Britain's manufacturing sector slowed in April but inflation pressures persisted, leaving analysts to conclude the Bank of England's Monetary Policy Committee is unlikely to cut interest rates at an upcoming meeting. NTC Economics said recently that its purchasing managers index for the U.K.'s manufacturing sector fell to 51 from 51.3, a figure revised down from 51.4. The outcome was stronger than expected, with economists Dow Jones Newswires surveyed recently having estimated a 50.8 reading for the PMI. The survey also indicated inflationary pressures remain strong, with manufacturers raising their prices at the fastest rate on record. So despite mounting evidence that the economy is slowing significantly, analysts say the central bank's Monetary Policy Committee is unlikely to rush into further interest rate cuts when it meets next. It cut the bank rate from 5.25% at its meeting last month, having previously reduced its key rate from 5.5% in Feb. & 5.75% in Dec. The decline in the PMI is in line with other survey measures of industrial activity. A survey the Confederation of British Industry released recently showed industrial-output growth slowed sharply in April, with total and export order books shrinking. Another survey by the European Commission released Wed. recorded a sharp drop in industrial confidence in March, with the headline measure falling to minus-5 from plus-1 as expectations of future production plummeted. The survey of purchasing managers also found that new orders had fallen for the 4th straight month. That suggests that the manufacturing sector is unlikely to rebound soon.