UK factory activity falls ‘at fastest pace for three years’
By Will Martin/ Business Insider
UK manufacturing data worse than expected, with mixed US and European results – as it happened
Britain’s manufacturers are suffering even more than expected in the immediate aftermath of the UK’s vote to leave the European Union, according to the latest data released by Markit last week. Markit’s data shows that Britain’s manufacturers hit just 48.2 in July, well below the 49.1 flash estimate released on July 22. That number represents a low not seen since the beginning of 2013.
The purchasing managers index (PMI) figures from Markit are given as a number between 0 and 100.
Anything above 50 signals growth, while anything below means a contraction in activity – so the lower the number is, the worse things look for the UK.
Speaking about the data, Markit’s chief economist, Chris Williamson, said: “Though these falls were not as marked as those seen during the Great Recession in 2007-2008, the drop was harsher than expected. The overall index was at its lowest since February 2013 and lower than reported by the recent flash PMI, which measured the effect of continuing uncertainty and the immediate impact of the EU referendum on the UK economy. Purchasing prices rose at levels not seen for half a decade, with SMEs bearing the brunt of rising input prices while larger corporates were more able to cope. And though export orders rose for the second month in response to the weaker pound, this was not enough to sustain the sector or make up any shortfall from the sluggish domestic market.”
And here is Markit’s terrifying chart, showing just how massive the contraction in post-Brexit Britain has been so far:
Unsurprisingly, the data was not greeted happily by economists, with Samuel Tombs of Pantheon Macroeconomics saying in an emailed note (emphasis ours):
The downward revision to July’s PMI from its initial flash reading shows that conditions in the manufacturing sector continued to deteriorate as the month progressed. The flash reading was based on data collected between June 12 to June 21, whereas the final reading includes responses up to June 26. The fall in the PMI mainly reflected a drop in the output index to 47.8-its lowest level since October 2012-from 53.6 in June.
Last week worse than expected reading is just the latest in a series of horrible data points for the British economy since the referendum, and shows just how likely it is that a recession is now on the cards in the UK. When Markit released its flash reading in July, Williamson noted that the economy “saw a dramatic deterioration.” So Monday’s reading is even worse than a “dramatic deterioration.” Any way one looks at that, it ain’t pretty, and the reading is just one of numerous bleak numbers.
We’ve already had a horrible flash PMI score, tumbling consumer confidence, a huge pullback on the hiring intentions of companies, and, as my colleague Jim Edwards pointed out over the weekend, the property market could soon grind to a halt. This is all in pretty stark contrast to the news coming out of Europe, where despite a minor deterioration in the manufacturing sector during July, the economy seems to be holding up with what Mario Draghi called “encouraging resilience” at the most recent ECB meeting.