Weak Euro exports peg back PMI

The CIPS/Markit purchasing managers index (PMI) showed the downturn in UK manufacturing production extending into its third successive month in September, as order inflows remained lacklustre and job losses continued to mount. The PMI edged lower to 48.4 in September, from 49.6 in August, to remain below the no-change level of 50.0 for the fifth month in a row. Companies linked lower production to reduced inflows of new export business and subdued domestic market conditions. A pick up in orders from new markets and the US for UK manufactured goods couldn't halt the overall decline. Commenting on the new PMI reading, EEF senior economist Andrew Johnson said it remained a challenging year for UK manufacturers. "The lower PMI reading indicates that on-going strength in orders from the emerging markets and the US is not counteracting the weakness in European markets that acted as a drag on export orders in September. "More positively, the overall orders balance did increase and demand for consumer goods may indicate that as inflation in the UK continues to ease, we could see stronger domestic demand in the final quarter of the year." Chris Williamson, chief economist at survey compilers Markit, said that after an initial rebound since activity was hit by the extra holidays for the Queen's Diamond Jubilee in June, a downward trend in the rate of output growth was again evident. At a quarterly rate in excess of 1% in September, the sector's decline could dampen economic growth severely and keep the economy in recession, he added. CIPS CEO David Noble said that 'fragile' continued to be the watchword for the UK's manufacturing industry. He continued: "The search for the Holy Grail of growth may take manufacturers to unfamiliar shores as exports remain challenging, especially when 50% of UK exports head to Europe. Increased levels of new work from clients in the USA and the Middle East signify that there are markets where UK manufacturers are having success due to a global, open and flexible approach. More of this approach across the industry may well help identify and focus exports where there are growth opportunities."