UK manufacturing recovery continues to deflate

The recovery in British manufacturing continues to lose steam, with new export orders last month declining for the first time since July 2009. The latest Markit/CIPS survey, a monthly snapshot of the sector, showed a fall in its main index of manufacturing activity to 53.4 in September, a 10-month low and compared with a revised figure of 53.7 in August. It is still above the 50 mark which separates growth from contraction. Hetal Mehta at Daiwa Capital Markets said: "Although the services PMI [due next Tuesday] will give an even better indication of economic activity, given its larger share of the economy, it seems that the renewed economic slowdown is well under way." New export orders fell slightly, as global demand weakened, with the sub-index dropping to 49.3 from 51.7. The output index fell to the lowest in a year. Price pressures are also weakening, with the input prices measures the lowest since January and output prices the weakest since March. "September saw the weakest expansion of UK manufacturing for a year, but some reassurance can be gained from the fact that growth has merely slowed from an exceptionally strong rate in the first half of 2010, and the latest PMI remains in line with the average seen in the years of robust manufacturing growth leading up to the financial crisis. The sector has now also recouped over 30% of its recession losses," said Rob Dobson, senior economist at Markit. "However, more worrying is the order book trend, with total orders rising only slightly following the marked downshift in August, and new export orders falling for the first time since July 2009. This suggests that the slowdown in production has further to run."