(RTTNews) - Growth in British manufacturing sector eased to a 26-month low in August, driven by a fall in production, new orders and employment, latest survey results from Markit Economics showed Thursday. The latest slump in factory activity has revived concerns of a double-dip.
The headline Markit/Chartered Institute of Purchasing & Supply (CIPS) purchasing managers' index, a measure of the health of the manufacturing sector, fell to 49 from 49.4 in July. The figure matched economists' forecast. A PMI reading below 50 suggests contraction of the sector.
It is evident that manufacturers are now finding life really challenging as domestic demand is held back by serious headwinds notably including tightening fiscal policy and a major squeeze on consumers, while a slowdown global growth is limiting export orders, said Howard Archer, chief economist at IHS Global Insight.
Production fell for the first time since May 2009 and new order inflows declined the most in almost two-and-a-half years. Manufacturers linked the reduction to weak domestic demand, rising global economic uncertainty and lower levels of new export business.
New work received from overseas clients fell at the fastest pace since May 2009, a marked turnaround from the near-record growth seen last December. Companies reported weaker market conditions in the US, mainland Europe and Ireland.
Commenting on the data, CIPS Chief Executive Officer David Noble said that the falling output signals a UK manufacturing sector in reverse-drive, much different from the dynamism of the early half of the year.
"The weakness of the UK consumer market looks like it is here for the long haul, despite a slight burst of activity in August as consumer goods manufacturers looked to rebuild their inventories from a low base," Noble said.
Manufacturing employment fell for the first time in 17 months, reflecting the declines in output and new orders. However, the rate of job cutting was only modest. Noble noted that though job losses were restrained, the ongoing turbulence of recovery is likely to discourage any significant new job creation for the time being.
On a positive note, rates of increase in average input prices and output charges eased further in August. Input costs rose at the slowest pace in 20 months, while factory gate prices rose to the least marked extent since last November
The British economic growth remained sluggish in the second quarter with the gross domestic product growing merely 0.2 percent sequentially following a 0.5 percent rise in the first quarter.
The British Chambers of Commerce on Thursday downgraded its growth outlook for the economy, citing impact from worsening global prospects. The economic growth is now seen at 1.1 percent for 2011 and 2.1 percent for 2012.
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