PMI slumps to 45 mark

The PMI from the Chartered Institute of Purchasing and Supply and the economics firm Markit showed the downturn in the sector gathering pace. Again below the median mark of 50.0, the index fell from 48.4 in June, to its lowest level since May 2009. Output and new orders both contracted sharply during July, as companies faced weaker demand from domestic and export clients. The decline in production was the steepest for 40 months, with contractions recorded in both the intermediate and investment goods sectors. In contrast, output rose slightly at consumer goods producers. The level of new export business declined for the fourth month running and at the fastest pace since February 2009. However, manufacturing employment rose slightly for the first time in three months with companies indicating that staffing levels had risen to complete outstanding contracts and as part of planned company expansions. However, the rate of increase was only marginal. Rob Dobson, Senior Economist at Markit and author of the PMI, said that the sector had hit turbulent waters and it was looking as though manufacturing remained a major drag on the overall economy. CIPS CEO David Noble believed, "a perfect storm of wet weather and weak confidence in the UK has combined with global economic drift to engulf the manufacturing sector ". At the manufacturers' organisation EEF, chief economist Lee Hopley said: "There isn't much positive news to take from this survey with demand being hammered by persistent weakening in eurozone markets and slower growth in other parts of the world. While recent sharp falls in official data can be attributed to some impact from one-off events, the weak PMI raises question marks over whether we will see a bounce back in the near future. Government will need to return from recess with a lot more clarity around its plans to get growth back on track."