British manufacturing at a record low

The Purchasing Managers’ Index (PMI) fell to 34.4 from 40.7 in October and it represents the fastest shrinking on British manufacturing since the last recession of 1992.

The fall in the index was driven by the fact that new orders have fallen significantly due to the reduction in business confidence and the downturn in construction activity and retail sales.

According to Rob Dobson, an economist at Markit, it is the size of the downturn that has affected manufacturing in the UK and the fall in PMI figures during November were not expected.

As well as the fall in retail sales and the struggling manufacturing industry, there is an even greater call for the Monetary Policy Committee to reconsider the need to drastically cut interest rates this week.

Alan Clarke from BNP Paribas has indicated that the index is showing ‘horrific’ levels of decline and that given the rapid fall and strength of contraction in the manufacturing sector, the likelihood is that the situation is only going to get worse.

The input and output price data from the PMI survey support the view that inflation is no longer a real issue, as the input price index tumbled to 44.2 from 54.5, which is the first time that it has been below the 50 point mark for over six years.

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