Recent data have raised fears that the long-awaited recovery in the manufacturing sector is coming to an end before it really had a chance to get going. One possible explanation for the recent weakening in the surveys is that the boost from the lower pound has started to fade. But there are still reasons to think that it has a bit further to run. Meanwhile, the global backdrop is still very supportive.
Admittedly, it may be that the manufacturing recovery has started to hit the buffers due to capacity constraints. As a result, it will be more important than ever for manufacturers to invest in future capacity. Encouragingly, though, the surveys of investment intentions have held up well. Overall, then, while the sector is unlikely to return to the 1% plus quarterly growth rates seen last year, we think the recovery has some life in it yet.
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