UK Feb. business grows steadily but coronavirus disruption looms

LONDON — British businesses kept up a solid rate of growth in February as factories posted the biggest rise in output for 10 months, despite ripples from China’s coronavirus epidemic affecting supply chains, a business survey showed on Friday.

Sterling rose against the US dollar and euro after the ‘flash’ early readings of the IHS Markit/CIPS UK Purchasing Managers’ Index (PMI) showed that the expansion of Britain’s services sector slowed slightly this month but that this was cancelled out by an unexpected upturn in manufacturing.

Britain’s performance beat the euro zone’s for the second month running as the PMI suggested the world’s fifth-largest economy looked on track to grow around 0.2% in quarterly terms after it slowed to a crawl late last year.

The composite PMI, which combines manufacturing and services indexes, held steady at 53.3 in February, jointly the highest reading since September 2018 and beating the consensus forecast of 52.8 in a Reuters poll of economists.

The survey chimed with other gauges which show the economy has picked up since Prime Minister Boris Johnson’s election victory in December, even though the level of the PMI remains below its long-run average.

The manufacturing PMI rose to 51.9 in February from 50.0, its highest level since April and above all forecasts in a Reuters poll, although counterintuitively this reading was boosted by the disruption to supply chains from the coronavirus outbreak.

Manufacturers were forced to wait much longer this month for the arrival of parts. In normal times, the PMI is designed to interpret this as a positive, as it usually reflects strong demand rather than supply chain disruption. —