Markit’s flash United Kingdom manufacturing purchasing managers’ index (PMI) came in at 49.1 in July from 52.1 the month before, falling short of economists’ expectations for a reading of 50. “Both production and new orders declined, albeit at weaker rates than seen in June”, said Amy Brownbill, an economist at Markit, which compiles the PMI survey.
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While the survey result was not as weak as predicted in a Reuters poll, the slight loss of momentum may be of concern to policymakers at the European Central Bank who have been trying to stimulate faster growth.
The index was 52.4 in June and a reading below 50 indicates activity is shrinking. An index measuring output, which feeds into the composite PMI, fell to 53.6 from 53.9.
Any figure under 50 in the PMI represents economic contraction rather than growth, and the headline figure of 47.7 is the “lowest reading since April 2009” just after the financial crash. Factories reported further job cuts.
Cost caution at manufacturers was also reflected in the steepest reduction in purchasing activity since March 2013 and further depletion of stock holdings.
“The lacklustre performance of the manufacturing economy adds to signs from the flash services PMI surveys that the underlying pace of economic growth in the second quarter remaind subued after a disappointing start to the year”, said Markit chief economist Chris Williamson.
“The downturn, whether manifesting itself in order book cancellations, a lack of new orders or the postponement or halting of projects, was most commonly attributed in one way or another to Brexit”.
However, new export business rose for the second straight month and to the greatest extent for nearly two years due to the sharp drop in the sterling exchange rate. This was mainly linked to the sharp drop in the sterling exchange rate.
“With a subdued global economy, it is not yet clear whether these opportunities will materialise in the long term”.
He did, as others before him have, concede that “the true extent of the impact of this uncertainty still remains to be seen” but that for now, it doesn’t look particularly good, especially given that optimism in the services industry is at this seven year low.
Meanwhile, similar flash PMIs for France and Germany both recorded increases.
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The preliminary German composite index rose to 55.3 points, the highest reading of this year.
