UK factories enjoy stronger growth in February but exports fall

Manufacturing PMI reflects new year bounce for economy but raises questions over government vow to move away from consumer-driven growth

British manufacturers enjoyed a pickup in business last month but they relied on domestic demand as exports fell against the backdrop of a troubled eurozone and stronger pound.

A closely watched survey showed factories continued to enjoy a bounceback after a slow finish to 2014. But details showed little progress in the government's push to rebalance the economy away from over-reliance on domestic consumer demand.

Scratching beneath the surface and we see a lopsided upturn, with the prime driver being a strong upsurge in new orders and production at consumer goods producers while a near-stalling of demand for plant and machinery points to ongoing weak business investment.

Separately, the appreciation of sterling is holding back the progress of UK exporters. It seems that, despite years of talk about a rebalancing of growth, we are still seeing only limited headway in moving away from consumer-driven expansions and towards a greater contribution from exports.

Services should presumably do even better since the consumer is facing a windfall from lower petrol and food prices which is likely to be spent. It's a bit like winning a lottery scratch card rather than a euro millions payout but the point is it's a positive and should help push the pace of quarterly GDP [growth] upwards over the course of the year.