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PMI points to manufacturing slowdown
Wed, 08 Feb, 2012
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PMI points to manufacturing slowdown
Wed, 1 Sep 2010, 09:56:00
Orders for Britain's manufacturers fell to their lowest level for 14 months in August as the sector's strong growth in the first half of 2010 stalled. Overall, the Chartered Institute of Purchasing and Supply's purchasing managers manufacturers index fell to 54.3 in August from 56.9 in July. While that figure still suggests healthy growth, any figure above 50 indicates expansion, it is the lowest reading since November and was well below forecasts. Other readings also suggested the UK manufacturing mini-boom may be faltering. The output index eased back to a nine-month low of 56 in August, though this also still represents a strong number. The PMI's new orders index fell to 52.0 in August from 58.5 in July, its lowest level since last June and biggest one-month fall in more than six years. Export orders rose, but weaker domestic demand outweighed this. "Some firms noted that subdued client confidence and uncertainty regarding public sector cuts had led to slower sales growth," the survey noted. The orders-to-inventory ratio also fell to its lowest in 17 months, another reading that suggests business will slow further in the coming months. Worryingly for the government and Bank of England, the fall in output was accompanied by the fastest rise in prices since mid-2008. Input prices did decline, though, and employment rose for the first month running. "The August purchasing managers' survey fuels concern that manufacturers will see softer growth over the coming months as inventory adjustment comes to an end, tighter fiscal policy increasingly bites, and global growth slows," said Howard Archer, chief economist at Global Insight. "Overall, the survey supports belief that the Bank of England will be keeping interest rates down at 0.50% through the rest of 2010 and well into 2011. Despite the 1.2% quarter-on-quarter jump in GDP growth in the second quarter, it is evident that the economy faces serious headwinds going forward," he added.
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