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| UK manufacturing decline adds pressure on Bank to cut interest rates | UK manufacturing decline adds pressure on Bank to cut interest rates |
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| Fresh signs of falling demand and job cuts in Britain’s manufacturing sector have raised pressure on the Bank of England to soothe post-referendum jitters with an interest rate cut this week. | Fresh signs of falling demand and job cuts in Britain’s manufacturing sector have raised pressure on the Bank of England to soothe post-referendum jitters with an interest rate cut this week. |
| Factory activity shrank at the fastest pace for more than three years in July as uncertainty about the political and economic outlook hit domestic orders and a weaker pound drove up the cost of imported materials for manufacturers, according to a closely watched survey. | Factory activity shrank at the fastest pace for more than three years in July as uncertainty about the political and economic outlook hit domestic orders and a weaker pound drove up the cost of imported materials for manufacturers, according to a closely watched survey. |
| News that the decline in manufacturing activity last month was steeper than first thought echoed other reports of a hit to business and consumer confidence from the Brexit vote and sparked fresh calls for government action to shore up economic growth. | News that the decline in manufacturing activity last month was steeper than first thought echoed other reports of a hit to business and consumer confidence from the Brexit vote and sparked fresh calls for government action to shore up economic growth. |
| The latest figures also cemented a view that the Bank’s monetary policy committee (MPC) will deliver the first interest rate cut since the financial crisis and reduce official borrowing costs to a new record low of 0.25% when its latest meeting concludes on Thursday. | The latest figures also cemented a view that the Bank’s monetary policy committee (MPC) will deliver the first interest rate cut since the financial crisis and reduce official borrowing costs to a new record low of 0.25% when its latest meeting concludes on Thursday. |
| “Action by the MPC looks ever more certain,” said Martin Beck, senior economic adviser to forecasting body the EY Item Club. | “Action by the MPC looks ever more certain,” said Martin Beck, senior economic adviser to forecasting body the EY Item Club. |
| Frances O’Grady, the general secretary of the Trades Union Congress, said the gloomy manufacturing survey was another warning sign that workers risk paying the price for the economic fallout from Brexit. | Frances O’Grady, the general secretary of the Trades Union Congress, said the gloomy manufacturing survey was another warning sign that workers risk paying the price for the economic fallout from Brexit. |
| “The government should not wait any longer to see which way the wind is blowing. We need an urgent package of public investment to keep the economy moving,” she said. | “The government should not wait any longer to see which way the wind is blowing. We need an urgent package of public investment to keep the economy moving,” she said. |
| The Markit/CIPS UK Manufacturing PMI survey, which polls more than 600 companies monthly, suggested domestic demand for manufacturers’ goods had been hit by uncertainty both before and after the UK’s referendum on EU membership on 23 June. That overshadowed a boost to export orders from a weaker pound, which makes UK goods cheaper. | The Markit/CIPS UK Manufacturing PMI survey, which polls more than 600 companies monthly, suggested domestic demand for manufacturers’ goods had been hit by uncertainty both before and after the UK’s referendum on EU membership on 23 June. That overshadowed a boost to export orders from a weaker pound, which makes UK goods cheaper. |
| The headline index was the worst since early 2013 and weaker than a “flash” post-referendum estimate published in July. | The headline index was the worst since early 2013 and weaker than a “flash” post-referendum estimate published in July. |
| The new reading, which takes in responses from a greater number of firms, stood at 48.2, down from the flash estimate of 49.1 and lower than 52.4 in June. A reading above 50 denotes expansion while a reading below suggests that activity contracted. Responses were collected between 12 and 26 July. | The new reading, which takes in responses from a greater number of firms, stood at 48.2, down from the flash estimate of 49.1 and lower than 52.4 in June. A reading above 50 denotes expansion while a reading below suggests that activity contracted. Responses were collected between 12 and 26 July. |
| The UK reading was much weaker than Markit’s PMI index of eurozone manufacturers. That stood at 52.0 for July, marking the 37th straight month of growth as a strong performance from German manufacturers offset weakness in Italy, Spain, France and Greece. | The UK reading was much weaker than Markit’s PMI index of eurozone manufacturers. That stood at 52.0 for July, marking the 37th straight month of growth as a strong performance from German manufacturers offset weakness in Italy, Spain, France and Greece. |
| In the UK, manufacturers were already shedding jobs before the referendum and the PMI report showed employment fell for the seventh month running in July. | In the UK, manufacturers were already shedding jobs before the referendum and the PMI report showed employment fell for the seventh month running in July. |
| The latest drops in output, new orders and employment were all steeper than the earlier flash estimates, noted Rob Dobson, senior economist at survey compiler Markit.. | The latest drops in output, new orders and employment were all steeper than the earlier flash estimates, noted Rob Dobson, senior economist at survey compiler Markit.. |
| “The downturn was felt across industry, with output scaled back across firms of all sizes and across the consumer, intermediate and investment goods sectors, although exporters did report a boost from the weaker pound,” he said. | “The downturn was felt across industry, with output scaled back across firms of all sizes and across the consumer, intermediate and investment goods sectors, although exporters did report a boost from the weaker pound,” he said. |
| He noted that the pound, which fell sharply against the euro and US dollar after the vote to leave the EU, had helped exports but made imports to the UK more expensive. | He noted that the pound, which fell sharply against the euro and US dollar after the vote to leave the EU, had helped exports but made imports to the UK more expensive. |
| As fears grow that the economy will slow sharply over coming months, there are expectations the Bank will complement the first rate cut since March 2009 with other measures. Those could include injecting more electronic cash into the economy using quantitative easing, or an expanded scheme to give firms and households better access to credit. | As fears grow that the economy will slow sharply over coming months, there are expectations the Bank will complement the first rate cut since March 2009 with other measures. Those could include injecting more electronic cash into the economy using quantitative easing, or an expanded scheme to give firms and households better access to credit. |
| The Bank will have more to mull over when Markit releases a poll of the construction sector on Tuesday and of the much bigger services sector on Wednesday. | The Bank will have more to mull over when Markit releases a poll of the construction sector on Tuesday and of the much bigger services sector on Wednesday. |
| The flash post-referendum PMI report in July already suggested activity fell at the sharpest pace on record in the services sector, which makes up the lion’s share of the UK economy and covers a wide range of businesses from hotels to insurance. | The flash post-referendum PMI report in July already suggested activity fell at the sharpest pace on record in the services sector, which makes up the lion’s share of the UK economy and covers a wide range of businesses from hotels to insurance. |
| That has prompted some economists to predict the economy will tip into recession. But other experts caution against reading too much into surveys taken against a backdrop of political turmoil in the aftermath of the Brexit vote. | That has prompted some economists to predict the economy will tip into recession. But other experts caution against reading too much into surveys taken against a backdrop of political turmoil in the aftermath of the Brexit vote. |
| “It’s still early days in terms of hard data,” said Ben Brettell, senior economist at the financial firm Hargreaves Lansdown. | “It’s still early days in terms of hard data,” said Ben Brettell, senior economist at the financial firm Hargreaves Lansdown. |
| “Surveys are driven by sentiment, and can therefore overreact. The dramatic fall in confidence may not ultimately be borne out by activity, and there is a case for a wait-and-see approach to monetary policy.” | “Surveys are driven by sentiment, and can therefore overreact. The dramatic fall in confidence may not ultimately be borne out by activity, and there is a case for a wait-and-see approach to monetary policy.” |