LONDON (MktNews) - The UK manufacturing sector continued to contract in July, and at a slightly faster pace than last month, according to figures published by the Chartered Institute of Purchasing and Supply Wednesday.
The purchasing managers' index slipped to 47.0 in July from an unrevised 47.3 in June. This was the fifth consecutive month that the headline index has stood below the breakeven 50-level.
The July result further sharpens the policy dilemma for the Bank of England. While manufacturers struggle to weather the global slowdown and the strong pound, consumer demand seems little affected.
Data released this morning by the CBI showed that retail sales volumes accelerated sharply in July to the highest level since May 2000. Yesterday, the Nationwide said that house prices rose by 1.1% on the month in July to stand 10.9% above levels a year ago and said the rate was "unsustainable".
The fall in the July PMI index was driven by declines in the output and employment indices.
The output index fell to 47.0 in July from 47.2 in June, signalling the fifth consecutive monthly contraction in output. CIPS said that the decline was mainly due to falling production in the intermediate goods sector.
The employment index fell to 45.2 from 45.6 last month as falling production resulted in increased redundancies at manufacturing firms.
Orders continued to contract in July at the same pace as seen in June, with the index remaining stable at 47.4. Last month's figure was the lowest since January 1999.
One surprising element of the report was that the export orders index rose in July, despite the slowdown in global demand. Although the index remains below 50, it increased to 49.5 in July from 48.6 last month. CIPS said that orders continued to be hit by the strong pound.
On prices, the survey continued to show falling prices and cost pressures. The output price index fell to 47.4 in July, the lowest level since the series began in November 1999.
Meanwhile input prices continued to show prices falling but at a slower rate than in June. The index rose to 46.0 in July from 45.7 last month.
Stocks of finished goods fell in July for 21 months running,, but at a slower rate than in the previous two months. The index rose to 47.3 from 46.5 last month. CIPS reported that firms were deliberately cutting inventories due to reduced demand.
Stocks of purchases also remained below the 50-level for the nineteenth consecutive month. Firms generally reported that stockpiles had been run down as purchasing managers sought to balance inventories against falling output. The index fell to 44.0 from 44.4 in July.