Manufacturing output shrinks again for seventh month in a row

The rate of new export orders slowed to its weakest since August

Manufacturing output shrank for the seventh month in a row last month, a closely watched survey revealed today, although the pace of decline was slower than expected.

The latest Markit/CIPS purchasing managers' index (PMI) produced a headline reading of 49.1 for November, an improvement on 47.3 in the previous month but below the 50 mark that separates expansion from contraction.

A contraction in the intermediate goods sector - sub-components later used in the manufacture of another product, such as a gear box in a car - and capital goods such as machinery offset gains in the consumer goods sector, Markit said.

Samuel Tombs, UK economist at Capital Economics, said: "The small improvement in the manufacturing survey in November does little to change the fundamental picture of a struggling industrial sector."

The economy bounced back to growth in the third quarter, with gross domestic product rising 1% between July and September.

However, experts have warned that the rebound was driven by one-off factors and the underlying picture is much weaker.

Bank of England Governor Sir Mervyn King recently warned that output could shrink again in the fourth quarter amid signs that the service, manufacturing and construction sectors are all suffering.

Demand from the domestic market remained subdued, Markit said, while the level of new export orders continued to deteriorate.

Companies reported weaker inflows of new business from clients operating in Europe and the US, it added, but the rate of new export orders slowed to its weakest since August. A total of one in five exporting manufacturers reported a decrease in new orders from overseas customers.

Employment levels fell among manufacturers for the fourth month running, with job losses picking up since October.

There was some bad news for the Bank of England on the inflation front as manufacturers increased average selling prices again.

Rob Dobson, senior economist at Markit, said: "Subdued domestic market conditions and declining export orders mean producers remain focused on keeping costs as low as possible.

"Employment, purchasing and stocks are all therefore continuing to be cut, which is likely to drag on the wider economy in the coming months."

PA