The closely-watched Markit/CIPS UK Manufacturing purchasing managers’ index fell to levels last seen in February 2013 as it hit 48.2 in July, down from 52.4 in June and below economists’ expectations of 49.1.
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China’s manufacturing sector posted a slight drop in July owing to the worst flood season in almost two decades and also weak demand, official data showed on Monday.
A reading above 50 indicates growth.
The Markit/CIPS manufacturing index is based on a survey of 600 industrial companies and reflects data on orders, output, employment, suppliers’ delivery times and companies’ inventories.
All but three of 49 economists polled expect the BoE to cut interest rates by at least 25 basis points on August 4, but economists were divided on whether the Bank would restart its bond-buying programme.
It also found that the rate of job losses across the sector was its second-sharpest for nearly three-and-a-half years.
“On that score, the weak numbers provide powerful arguments for swift policy action to avert the downturn becoming more embedded”.
While the official PMI pointed to softened momentum in manufacturing, the NBS’ reading for the service sector showed continued strength, reaching 53.9 in July, the highest in seven months. The drop in new orders should come as little surprise given the previous five months had all seen growth in new work moderate.
Copper prices rose to a one-week high on the positive data and boosted mining stocks. National figures showed the French economy stalled while that of Spain slowed slightly but continued to record stronger growth than the currency area as a whole.
The report suggests that Britain’s decision to leave the European Union may have a harsher impact on the economy than initially expected.
Monday’s worse than expected reading is just the latest in a series of frightful data points for the British economy since the referendum and shows just how likely it is that a recession is now on the cards in the UK.
Meanwhile, concern is still expected to hover around France as the country’s manufacturing index failed to register an improvement and remained below the 50-point mark, despite touching a four-month high.
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China is a vital driver of global growth, but its economy grew only 6.9 per cent in 2015 – its weakest rate in a quarter of a century – and has slowed further this year.
