PMI slumps to 49 as recession fears grow

The trend in new export business was also substantially weaker than one month ago. At 49.0 in August – a whole digit below the neutral 50.0 point – the Markit/CIPS UK Manufacturing Purchasing Managers' Index(PMI) posted its lowest reading for 26 months. Lower production was recorded in the intermediate and investment goods sectors. Consumer goods output rose at the strongest pace for five months. The volume of new orders declined for the fourth month running in August, with the rate of contraction accelerating to the sharpest since April 2009 and the trend in new export orders deteriorated sharply. August also saw manufacturing employment fall for the first time in 17 months, reflecting the declines in output and new orders. However, the rate of job cutting was only modest. Industry commentators greeted the news with varying levels of gloom. At the manufacturers' organisation EEF, Chief Economist said Lee Hopley said: the picture painted by the figures across Europe and the UK was "far from encouraging". At Barclays Corporate, Head of Manufacturing Mark Lee many businesses were sitting on cash and failing to invest in growth. "It is hard to see manufacturing sentiment returning to the heights of nine months ago any time soon," he concluded. Chris Williamson, chief economist at Markit, believed that manufacturing is set to slide back into recession and act as an increasing drag on the country's economic recovery while CIPS CEO David Noble (pictured) said the weakness of the UK consumer market "looked like it is here for the long haul" although a silver lining was the continued easing of inflationary pressure which is helping many businesses to protect their margins and maintain their prices, despite input costs staying relatively high.