UK manufacturing sees sharp fall
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The UK"s manufacturing
sector shrank in September at the fastest rate for 17 years, a survey has
The Chartered Institute of Purchasing and
Supply"s purchasing managers" index fell to 41 last month, its lowest reading
since records began in 1992.
Any reading below 50 indicates a
contraction. Domestic demand was particularly weak with clients cancelling
The survey is likely to add to fears that
the UK is entering a recession.
Analysts said the weakness of the survey
meant that the Bank of England might cut interest rates as early as next week.
The figures from CIPS mark the fifth
consecutive month of contraction in the manufacturing sector.
September"s figure was much lower than
expected. August"s reading had been 45.3, and analysts had forecast a figure of
about 45 for last month.
The new orders and employment indexes were
the weakest since 1992, while new export orders showed the sharpest decline in
"Wherever you look in the survey,
there is serious weakness, with output, new orders, and backlogs of work all
contracting at the fastest rate in the survey"s history," said Howard
Archer of Global Insight.
He said the figures might "boost
hopes" that the Bank of England might cut interest rates from 5% to 4.75%
as soon as next week.
BNP Paribas analyst Alan Clarke said he was
surprised at the rate of the fall.
"If this weakness is echoed in the
services PMI later this week, it is screaming out for a rate cut at the October
meeting," he said.
The Monetary Policy Committee (MPC) has
held rates unchanged at 5% since April in an attempt to keep inflation under
control. The latest price data showed CPI inflation stood at 4.7% in August,
more than double the 2% target.
The latest CIPS survey highlights the
difficulties that British manufacturers are facing in the challenging economic
The consumer goods sector was the worst
hit, with output and new orders down sharply.
The Output Index fell from 47.6 to 41.2,
with manufacturers attributing the drop to lower volumes of new business.
The increasingly tough economic environment
together with problems in the credit market led to clients cancelling or
postponing new agreements.
"Given the unprecedented chaos in
global economies, there was little respite for UK manufacturers in
September," said Roy Ayliffe, CIPS"s director of professional practice.
Firms had begun to lay-off non-essential
staff, the survey found, and there was also a trend towards not filling vacated
positions and postponing expansion plans.
One positive point was that the benefits of
the falling price of oil and other commodities had begun to trickle through,
with input cost inflation reaching to a seven-month low.
1 October 2008