THE DAILY TELEGRAPH: Britain's manufacturing industry slumped “from rapid expansion to near stagnation” last month, according to the closely-watched purchasing managers’ index, raising fresh questions about the strength of the recovery.
The surprise dip in activity caused the pound to tumble almost a cent against the dollar.
“All this does is place further doubts over the strength of the UK’s economic recovery, which pushes back expectations of a long-awaited Bank of England rate rise,” said Caxton FX currency analyst Richard Driver. “Some players bet on a rate rise at the end of this year, but as things stand we are likely to have to wait until the end of the first quarter of 2012.”
Although the index, which fell from 54.4 to 52.1, indicated that activity is continuing to grow, the rate of expansion is the slowest since September 2009, when the UK was in recession. More worrying still was evidence that output and new orders contracted last month.
Samuel Tombs, UK economist at Capital Economics, said the output and new orders data, at 49.9 and 48.3 respectively, suggested “that a sharp underlying slowdown in demand is taking place”.
The Government has pinned its hopes for sustained growth on a resurgent manufacturing industry, driven by exports, and accompanying business investment, so the data –from the Chartered Institute of Purchasing & Supply and Markit – is concerning. » | Philip Aldrick, Economics Editor | Wednesday, June 01, 2011
