(menafn – ecpulse)
U.K. PMI manufacturing raises concerns as the reading showed an ease in expansion to 50.5, the lowest since December, compared to forecasts of 51.5 while the prior reading of 52.1 was downwardly revised 51.9.
The reading raise worries as it may give a sign there could be deeper recession in the second quarter after the British economy has recorded 0.2% contraction in the first quarter, following the 0.3% contraction recorded in the last quarter of 2011.
Details with the GDP release revealed that manufacturing witnessed 0.1% contraction in the quarter ended March.
The economy is facing many risks, most notably the threats posed from neighbor European economies which suffers from the lingering effects of the debt crisis.
With the woes intensifying in Spain that may resort eventually to a bailout and possible spread to Italy and France, the U.K. is vulnerable to a significant risk.
Also, the recent strength in the sterling is weighing exporters; the British pound has been showing advance for four consecutive months against the dollar and may continue advance this month amid expectations the Fed may add to stimulus.
Yet, following the new the pound retreated for a second day against the dollar to trade around 1.6215 compared to the day's opening of 1.6232.
Moreover, another threat is coming from the recent rise in inflation as CPI for the year ended March unexpectedly soared for the first time in six months to 3.5% from the lowest in 15 months of 3.4% in February, where prices halted its downside fall after retreating from a high of 5.2% in September last year.
Additionally, while ILO unemployment for the three months ended February retreated to 8.3% compared with a prior of 8.4%, the deficit-cutting program may shave 700,000 government jobs by 2017.
In April, BoE opted to leave both borrowing cost and APF steady at 0.50% and 325 billion pounds, yet it seems that the expansion of stimulus in February was not enough to bolster growth amid worries stemming from the euro area, U.K.'s largest export market.
However, policy makers may not be able to add to stimulus any soon after the rebound in prices.