Markit’s Purchasing Managers’ Index for manufacturing, which accounts for about a fifth of the economy, eased to 53.8 in July from 54.5 in June, remaining well above the 50 line that separates growth from contraction. A survey reading above 50 indicates expansion.
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The eurozone’s manufacturing sector slowed in July, while Germany accounted for much of the growth that was recorded as activity declined in France, and edged toward stagnation in Spain and Italy, according to surveys of purchasing managers.
Analysts also viewed that July’s data “do not bode well for GDP growth” in the second half of this year, as the real estate sector which fueled growth in the first half may have peaked.
Dudley, a close ally of Fed Chair Janet Yellen, warned of potential negative shocks due to the unknown fallout from Britain’s vote to leave the European Union, a strong dollar, and because it was safer to delay a move with interest rates so low.
The drops in output, new orders and employment were all steeper than the earlier flash estimates and will add pressure on the Bank to lower borrowing costs from their current 0.5% when policymakers announce their latest decisions on Thursday.
He said: “The weak numbers provide powerful arguments for swift policy action to avert the downturn becoming more embedded and help to hopefully play a part in restoring confidence and driving a swift recovery”.
In fact, it added, the new sales orders index signaled that the recent improvement in demand was sustained in July with a slight increase to 54.4 index points.
But the boost to exports from a weaker pound was less marked than previously estimated, Mr Dobson said.
The main factor underlying the fall was a softer positive contribution from new order growth.
The shedding of staff was linked to the slide in output, with restructuring, redundancies and outsourcing all leading to job cuts, the survey said.
“The downside of the currency was an upsurge in input price inflation to a five-year high on the back of rising import costs”.
“With the ink still wet on last month’s policy statement, the latest slew of economic data, however, continue to highlight the lingering fragility in the domestic economy”, Lindsey M. Piegza, Chief Economist at Stifel, said.
“Without new orders coming through, this downward trajectory is likely to get worse, at least in the short term”.
If the Bank believe that the initial shock of the Brexit vote would be followed by a business-as-usual approach, then the Bank could well stay on hold.
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“The performance of India ‘s manufacturing economy continued to improve in July, with a stronger expansion in new business contributing to faster increases in output and buying levels”, Nikkei said in a release on Monday.
