Bleak outlook for UK manufacturing industry – is Brexit to blame?
Confidence in the manufacturing industry plummeted in April, according to the latest purchasing managers' index (PMI) data out this morning, raising fears about a sustained slowdown in the sector – and the wider economy.
On a scale where scores below 50 mark contraction, the Markit/Chartered Institute of Procurement and Supply (CIPS) survey came in at 49.2 – its lowest level in more than three years and down from 50.7 in March.
Read more: Are we counting down to the next economic slowdown?
"[The] UK manufacturing sector made a dismal start to the second quarter," said Paul Hollingsworth at Capital Economics.
"The first reading below 50 from the UK’s manufacturing sentiment survey since May 2013 raises fresh concerns over Britain’s economic growth prospects but also those of the world, as this weak number follows equally disappointing readings from China and America," said Russ Mould, investment director at AJ Bell.
The pound lost some of its ground against the dollar after the survey was released, dropping by 0.2 percent. It was still up 0.3 per cent on the day at $1.4718, however.
Oh dear! UK Manufacturing PMI drops to 49.2 a 3 year low & much weaker than 51.2% exp. Impact of Brexit fears? #GBPUSD falls 30 pips #Forex
— Richard Perry (@RPMarketAnalyst) May 3, 2016
"This is a worrying and disappointing survey," said Howard Archer of IHS Global.
Analysts were divided on what was behind the slip into contraction territory. IHS' Archer said that the results "can only fuel concern that mounting uncertainties ahead of June's EU referendum are taking an increasing toll on the economy".
Capital Economics' Hollingsworth, however, said he would be reluctant in "attributing too much of this [fall to] uncertainty surrounding the EU referendum … Instead it probably reflects sterling's past appreciation and weak overseas demand to a greater extent.
The FTSE 100 accelerated its downward slide on the news. It has dropped 0.7 per today to 6,197.