UK Recovery Could Lose Pace as Manufacturing Growth Cools

The results of a survey capturing business conditions in the British manufacturing sector, due out on 1 September, are expected to add to signs that the UK economy could lose some steam in the second half of 2014.

The latest Markit purchasing managers' index (PMI) data for Britain's manufacturing sector, a widely tracked gauge of industrial activity, is due out at 0930 BST.

A Reuters poll of economists has forecast slightly slower manufacturing growth for August when compared to July 2014.

Earlier, Britain's main manufacturing trade body said it has lowered its growth forecast for 2014 after its members reported the first fall in export orders since early 2013.

The EEF association said it has trimmed its forecast for factory output growth in 2014 to 3.3%, from 3.5%, after its quarterly poll of members showed slowing growth in output and new business over the past three months.

The EEF also said that the picture for demand was now "more uncertain than for some time", with the Eurozone economy stagnating, political risks on the rise and a stronger Sterling exchange rate.

EEF said in a 31 August statement: "The EEF/BDO Q3 Manufacturing Outlook survey reveals a continued positive picture with continued confidence being translated into on-going plans to invest in modern machinery and recruit skilled employees. In particular, investment intentions have now been positive for seventeen consecutive quarters."

EEF Chief Economist Lee Hopley said in the statement: "Manufacturers are still on course for a strong year of output growth in 2014, but our survey points to a moderation in the pace of expansion from the take-off seen in activity over the past year. We're also seeing manufacturers continue to recruit for skilled jobs and increase their plans to invest in the coming year – exactly what the UK economy still needs for balanced growth.

"However, there are clearly increasing downside risks overseas which could make sustaining strong growth and particularly stronger exports more challenging going forward. In the face of this, while UK politicians may be focused on next year's election it is critical that efforts over the rest of this parliament remain focused on sustaining growth across manufacturing and the economy."

The EEF survey was conducted between 30 July and 20 August and 298 firms responded.