Exports hurt by eurozone slowdown

The weakness in manufacturing also cranks up the heat on the coalition Government, which is grappling a shrinking economy and a series of political blunders as parties face a test of popularity in local elections tomorrow.

The economy has not fully recovered from a steep decline in 2008-2009, slipping back into recession at the beginning of 2012, but central bankers have so far hinted they are reluctant to extend their ‘quantitative easing’ asset purchases later this month following a run of stronger business surveys and sticky inflation.

The composite Markit/CIPS Manufacturing Purchasing Managers’ Index (PMI) fell to 50.5 in April from a downwardly revised 51.9 in March, keeping just above the 50 level which separates growth from contraction, a survey showed yesterday.

The outcome fell short of forecasts for a dip to 51.5.

Sterling fell against the dollar and euro after the release, which also contributed to a rally in British government bonds.

“It’s all apiece with recent data which tells us that the economy is weak and likely to remain so for some time,” said Peter Dixon, economist at Commerzbank.

Eyes are now on the service sector PMI, due tomorrow, which is also expected to show slower growth.

“If the April services PMI also falls back markedly and the eurozone crisis intensifies in coming days, then the Monetary Policy Committee (MPC) could well decide to add more stimulus at the May meeting next week,” said Citi economist Michael Saunders.

For the time being, most economists do not expect more quantitative easing.

The manufacturing PMI, the lowest since December, lent some credence to disputed official data that showed an economic contraction in Britain in early 2012.

The Bank and many economists have argued that the official figures understate the economy’s true strength.