Wednesday, October 01, 2008

UK manufacturing sees sharp fall

The UK's manufacturing sector shrank in September at the fastest rate for 17 years, a survey has suggested.

The Chartered Institute of Purchasing and Supply's purchasing managers' index fell to 41 last month, its lowest reading since records began in 1992.

Any reading below 50 indicates a contraction. Domestic demand was particularly weak with clients cancelling orders.

The survey is likely to add to fears that the UK is entering a recession.

Analysts said the weakness of the survey meant that the Bank of England might cut interest rates as early as next week.

The figures from CIPS mark the fifth consecutive month of contraction in the manufacturing sector.

September's figure was much lower than expected. August's reading had been 45.3, and analysts had forecast a figure of about 45 for last month.

The new orders and employment indexes were the weakest since 1992, while new export orders showed the sharpest decline in seven years.

Full story at BBC News.

The impact of the fall in manufacturing can be seen very clearly in the steel industry. Stockholders and service centres are all reporting weak order intake, particularly from the automotive and construction industries. This is working through to the steel manufacturers who are finding orders hard to solicit. In an endeavour to resist downward pressure on prices, many are now reducing production. Nevertheless, we are seeing spot prices down as stockholders seek to reduce inventory.

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