British manufacturing slumps to 26-month low: PMI
British manufacturing activity tumbled to a 26-month low in August, a key survey showed Thursday, sparking fresh speculation over a potential double-dip recession.
The manufacturing purchasing managers' index (PMI) compiled by private firm Markit stood at 49.0 points in August, down from 49.4 in July.
The result was better than market expectations for a reading of 48.5 according to analysts polled by Dow Jones Newswires.
However, another reading below the 50 level indicated that the sector contracted for a second straight month. The PMI manufacturing index is watched as an important leading indicator for the performance of the wider economy.
Significantly, new orders declined for the fourth month in a row in August, recording the sharpest fall since April 2009.
"August's report on manufacturing has brought further evidence that the slowdown in the global economic recovery is starting to hit the UK manufacturing sector hard," said economist Samuel Tombs at the Capital Economics consultancy.
"All in all ... the survey highlights the increasing risk that the industrial sector -- and perhaps even the overall economy -- is heading for a double-dip."
The news will come as a blow to British finance minister George Osborne, whose coalition government wants the private sector to help prop up the economy after painful cuts in public expenditure.
"The bad news in this release comes on the back of a contraction in manufacturing activity and a steep drop in consumer and business confidence in the eurozone," said economist Teodor Todorov at the Centre for Economics and Business Research consultancy.
"With the European debt crisis likely to be a drag on the European economy for some time, UK exporters will face less demand from their biggest trading partner.
"Domestic demand in the UK is likely to be flat this year and growth in the manufacturing sector will continue to be very weak," Todorov said..
Separate Markit data Thursday showed that eurozone manufacturing hit reverse gear in August, tumbling to a two-year low of 49.0 points in August, down from 50.4 in July.
The struggling British economy grew by just 0.2 percent in the second quarter, after flatlining over the previous six months, stoking concern that it could be heading for another downturn.
Britain's slowdown, after escaping from recession in late 2009, had been widely forecast as the coalition pursues tough measures to slash a huge budget deficit in the belief this will eventually give the economy room to grow.
© 2011 AFP