Reuters reported that growth in Britain's manufacturing sector eased slightly in July 2010, with euro zone wobbles weighing on exports, but the figure still beat forecasts and remained indicative of buoyant growth in the sector.

There was also a sharp slowing in both input and output price inflation, something that should help reassure Bank of England policymakers that inflation is on its way down.

The Markit Chartered Institute of Purchasing & Supply manufacturing PMI fell to 57.3 in July from 57.6 in June, above forecasts for a reading of 57.0 and holding close to May's 15 year high of 58.1.

Financial markets showed barely any response to the data, which did little to alter the view that activity will weaken as the year progresses and government spending cuts kick in, and that the BoE will therefore have to leave policy loose.

Mr George Buckley strategist at Deutsche Bank said that "It's still pretty robust really. It's fallen for a couple of months but is well above its long-term average."

Britain has introduced a raft of austerity measures to tackle a bulging budget deficit, which it aims to eliminate by 2015, raising fears that the economy’s recovery could be put at risk.

Britain’s economy grew at its fastest pace in four years between April and June, but BoE Governor Mr Mervyn King warned last week that the pace of growth may not be sustained and that now was not the time to start pressing on the monetary brakes.

Mr Rob Dobson senior economist at Markit said that "This all suggests that the manufacturing sector will remain a strong contributor to GDP in the third quarter, raising hopes that growth of the economy may not slow too significantly. There are some concerns that growth may slow more sharply in coming months, however, especially in relation to exports. Overseas sales growth collapsed from a survey record rate of increase in April to near stagnation in July."

Export orders slowed to their lowest reading since August last year, possibly due to sterling’s recent strength against the euro. Markets are wary about the fiscal positions of some countries in the euro zone, Britain's biggest trading partner.

Markit/CIPS said that some respondents to its survey reported efforts to reduce backlogs of work and cut back inventories, partly to improve cash flow positions. Such initiatives helped support employment.

(Sourced from www.reuters.com)