UK manufacturing contraction eases, orders still fall

Mon Dec 3, 2012 6:08am EST
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By Jonathan Cable

LONDON (Reuters) - British manufacturing activity shrank less than expected in November though the sector remained fragile as orders edged down, a survey found on Monday.

The data painted a mixed picture of the economy's prospects just two days before finance minister George Osborne is due to update parliament about his budget plans.

The Markit/CIPS Purchasing Managers' Index for the manufacturing sector jumped to 49.1 - its highest level since August - from October's downwardly revised 47.3. That beat the median forecast of 48.0 in a Reuters poll of economists and exceeded even the highest prediction of 48.9.

Nonetheless, the index remains below the 50 mark that separates growth from contraction, where it has been since April.

"We are getting closer to the 50 level, so it is moving in the right direction, but it goes to confirm our view that UK economic activity in the fourth quarter remains sluggish and the immediate prospects don't look particularly bright," said Peter Dixon, economist at Commerzbank.

In a separate survey by lobby EEF, British manufacturers reported stagnant output over the past quarter - the weakest reading since late 2009 when the country was recovering from its deepest recession in more than 50 years.

Britain has suffered two recessions in the past four years, despite the Bank of England slashing interest rates to a record low of 0.5 percent and creating 375 billion pounds in new money - equal to around a quarter of GDP - to boost economic growth.

The economy is seen growing by a tepid 0.1 percent in the current quarter, with little pick-up predicted over next year. Recovery has been hampered by a drawn-out debt crisis in the euro zone, Britain's main trading partner, as well as by the government's tough austerity plans.   Continued...

Employees of JJ Churchill precision engineering polish turbine blades in the company's factory in Market Bosworth, central England, October 10, 2012. REUTERS/Tom Bergin