Manufacturing sector shrinks again
Monday, 01 Sep 2008 14:01
Manufacturing declines
The manufacturing sector has shrunk for the fourth month in a row as analysts warned a further contraction is likely.
The manufacturing purchasing managers' survey for August showed output fell by 0.4 per cent quarter-on-quarter in the second quarter, putting the sector in recession.
The index revealed manufacturing activity hit 45.9 in August. On this index, under 50 points is a contraction.
Although this was less of a sharp decline than in July, a decline in new orders means manufacturing is not likely to pick up soon, according to economists.
The figures also make a recession for the UK look more likely in the coming months.
Howard Archer, economist for Global Insight, said: "Manufacturers are clearly being hit increasingly hard by slowing domestic demand, weakening activity in key export markets, high input prices and tight credit conditions.
"While the marked depreciation of the pound is providing a much-needed boost to UK manufacturers, this is being countered by substantially weakening domestic demand in the Eurozone and a still very soft US economy.
"Consequently, export orders contracted markedly again in August after sinking to a six-and-a-half year low in July."
Despite falling demand, prices are still rising due to higher raw materials costs. Rising inflation will maintain pressure on the Bank of England this Thursday as the monetary policy committee meets to set the interest rate, Mr Archer added.