The British manufacturing sector is still ‘too reliant’ on domestic demand, economists have said.
The news follows a closely-watched survey that showed growth in export orders slowed considerably in March. Export orders by Markit and the Chartered Institute of Purchasing and Supply (CIPS) fell to 52.8 in March, down from 54.6 in February. Although this is still above the 50 level that separates growth from contraction, it highlights the imbalance in the British economic recovery, the survey has shown.
Economists warned that the economy will struggle to regain balance without a weakening of the pound, following figures released last week that shows the UK’s deficit, the shortfall of exports against imports, stood at its highest level as a proportion of the economy since 1989.
Rob Dobson, senior economist at Markit, said:
“The old criticisms still apply, however, with the survey signalling a downturn in export growth and an expansion that is all-too reliant on domestic consumers.”
However, he added that the overall growth in manufacturing, and the pace of job creation – the sector has created new jobs for 11 consecutive months – suggested rebalancing is underway. The recreation of new jobs in the sector has benefited British contractors, who have seen more and more manufacturing brought back to the UK.
“We may be still a consumption-oriented economy in many respects, but at least we now appear to be producing more of the goods we sell ourselves, which is a more sustainable situation to be in,” Mr Dobson added.
Economists also said that any disappointment should be moderate and we should take home the message that the economy remains solid and continues to drive strong job creation. However, we’re not completely out of the woods just yet.
Photo by Kenichi Nobusue