UK manufacturing PMI falls to lowest level in over three years in July

Expansion in Britain's manufacturing sector slowed down more than expected in July, as the sector expanded at its lowest pace in over three years, according to a survey by Markit Economics and the Chartered Institute of Procurement & Supply (CIPS) released on Monday (1 August).

The Markit/CIPS UK Manufacturing PMI stood at 48.2 last month, compared with an initial 49.1 estimate and analysts' expectations for an unchanged reading and down from the 52.4 recorded in June.

The figure marks the lowest reading since February 2013 and only the second time in since early-2013 that the PMI has fallen below 50.

The survey highlighted the impact the Brexit vote has had on the British economy, and on the manufacturing sector in particular, could be worse than originally expected.

Markit added the decline in production was the steepest since October 2012, with contractions across the consumer, intermediate and investment goods sectors.

The intermediate goods sector suffered the sharpest drops in both output and new orders, while investment goods manufacturers also reported a slight decline in new work received during last month.

New orders increased slightly amid consumer goods producers, although the pace of growth was significantly slower than in the prior survey month, while the level of incoming new export orders in the UK manufacturing sector rose for the second successive month in July.

Markit indicated the expansion was boosted by the pound's recent decline and by efforts by companies to secure new contracts. Export business, meanwhile, increased steadily at intermediate and investment goods producers, but fell for the second time in three months in the consumer goods sector.

"The weakening order book trend and upswing in cost inflation point to further near-term pain for manufacturers," said Rob Dobson, senior economist at Markit.

"On that score, the weak numbers provide powerful arguments for swift policy action to avert the downturn becoming more embedded and help to hopefully play a part in restoring confidence and driving a swift recovery."