UK manufacturing activity slows
British manufacturing activity contracted in July for the first time since the country was in recession two years ago, data showed on Monday, adding to signs that the recovery is faltering and piling more pressure on the government to boost the economy.
The Markit/CIPS manufacturing PMI headline activity index fell to 49.1 in July from a revised 51.4 in June – the first time it has been below the 50-level that separates contraction from expansion since July 2009, and the weakest reading since June of that year.
Analysts had expected a slowdown in growth, not a contraction, and forecast a PMI reading of 51.0.
The survey is further evidence that Britain’s fragile recovery is wilting, leaving the nation in the midst of its longest phase of economic weakness in almost a century.
“It is not entirely unexpected given that three of the pillars supporting the surge during Q1 – inventory rebuilding, a purple patch in global growth and stable domestic demand – have somewhat crumbled,” said Markit senior economist Rob Dobson.
“With austerity arriving at home and debt ills rising in the U.S. and euro area, significant headwinds are on the horizon,” he said.
Official data last month showed the economy grew a meagre 0.2 percent between April and June, and the PMI data adds to recent evidence the third quarter also got off to a poor start.
This is likely to reinforce expectations the Bank of England will leave interest rates at their record low 0.5 percent at its policy meeting later this week and for a long time to come.
The weak figures will also bolster the case for those on the Monetary Policy Committee who think the central bank should inject more stimulus into the economy, and may even persuade the two hawks on the committee to rethink their calls for higher interest rates.
A sharp slowdown in input and output prices, meanwhile, will reassure policymakers that inflation is heading lower.