World News - UK manufacturing at 26-month low
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    World News - UK manufacturing at 26-month low

    1 September 2011 Last updated at 05:31 ET Activity at UK factories fell to a 26-month low in August, with output, new orders and employment all down, a survey has suggested.

    The Markit/Cips manufacturing purchasing managers' index (PMI) fell to 49 last month. Any level below 50 implies contraction in the sector.

    It is based on a survey of purchasing executives at over 600 firms.

    New export business, which has driven the recent manufacturing recovery, fell at its fastest rate since May 2009.

    Export demand had been growing at close to record levels as recently as December, according to past surveys.

    'Worrisome drop' August also saw the sharpest fall in new orders for the sector in two-and-a-half years, and the first drop in output since 2009.

    "The second half of 2011 has so far seen the UK manufacturing sector, once the pivotal cog in the economic recovery, switch into reverse gear," said Rob Dobson, senior economist at Markit, who produce the survey on behalf of the Chartered Institute of Purchasing and Supply (Cips).

    "The sudden and substantial drop in new export orders is particularly worrisome, with UK manufacturers hit by rising global economic uncertainty, just as austerity measures are ramping up at home.

    "As consumer and business confidence are slumping both at home and abroad, it is hard to see where any near-term improvement in demand will spring from."

    Silver lining Manufacturers focused on the finished consumer goods section did see a sharp upturn in output, although Markit said this appeared to be related to stock-rebuilding and is therefore unlikely to be sustained.

    One positive note in the survey was a slowdown in input costs, to their slowest rate of increase in 20 months, which may increase the pressure on the Bank of England to engage in further monetary expansion.

    "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," said the CIPS chief executive, David Noble.

    "The silver lining at this point is the continued easing of inflationary pressure which is helping many businesses to protect their margins and maintain their prices, despite input costs staying relatively high."

    Do you have a small business? How has the economic climate affected you? Send us your comments using the form below.

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    World News - UK manufacturing at 26-month low

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