Log In

Reset Password

UK manufacturers report weak conditions

LONDON (Reuters) - British manufacturers reported some of the weakest conditions ever in January when they cut jobs at a record pace, monthly purchasing managers index data showed yesterday.

The headline number rose to 35.8 in January from December's 34.9 — slightly better than the return to November's record low of 34.5 forecast by economists but still the third-weakest reading in the series' 17-year history.

"The latest PMI figures highlight the appalling market conditions that UK manufacturers are currently facing," said Rob Dobson, an economist for pollsters Markit, who conduct the survey for the Chartered Institute of Purchasing and Supply.

"Although the PMI output index rose for the second month running it was still consistent with production contracting by around six percent year on year," he said.

Weaker global demand outweighed any benefit from sterling's fall against major currencies, and domestic conditions were especially poor due to the crisis hammering carmaking, construction and retail. "The principal factors underlying the weak performance of UK manufacturing remained the downshift in global aggregate demand and frozen credit markets," the survey said. Sterling extended losses on the data to hit a session low against the dollar, down two percent on the day, and economists warned that the figures pointed to a continuing contraction in jobs and output.

"We're looking for sub-potential economic performance for a very long time going forward. The rises in unemployment we've seen are only the beginning," said Nick Kounis, an economist for Fortis.

"The index is still consistent with collapsing manufacturing output, but it does provide tentative evidence that the fourth quarter was the deep point of recession," he said.

The employment element of the index hit a fresh record low, falling to 33.5 from 33.9 as firms cut capacity and costs to match thinner order books. The further a number in the survey is below 50, the faster the pace of decline.

The fall reflects the raft of redundancies announced by British manufacturers over the past month, which the survey said were concentrated in bigger firms. Steelmaker Corus said it was cutting 2,500 jobs on January 26 and carmaker Nissan announced 1,200 lay-offs at the start of the month.