Britain's manufacturing sector lost momentum in August, with activity growing at its slowest pace in nine months, according to purchasing managers. The August CIPS/Markit purchasing managers index for the sector fell to 54.3 from a downwardly revised 56.9 in July, according to data released Wednesday. The August reading was the lowest since November and fell short of expectations for a reading of 56.7. A reading of more than 50 indicates an expansion in activity, while a figure of less than 50 signals a contraction.
"While still clearly pointing to expanding activity, the August purchasing managers' survey is nevertheless disappointing and reinforces suspicion that the first half of the year was as good as it gets for U.K. manufacturers," said Howard Archer, chief U.K. and European economist at IHS Global Insight. In the first half of the year, manufacturers benefited from stronger domestic and foreign demand, improved competitiveness in domestic and foreign markets as a result of the weak pound, and lean inventory levels, Archer said.
The August PMI underlines concern softer growth is in store for the second half as inventory adjustment runs its course, the government tightens fiscal policy and global growth slows, he said. Meanwhile, the final manufacturing PMI reading for the 16-nation euro zone confirmed that the pace of growth in the single-currency region also slowed.
The PMI fell to a six-month low of 55.1 from 56.7 in July, but was slightly above a preliminary reading of 55.0. Overall, euro-zone PMI readings "are pointing to a cooling in industrial output in Q3 to yearly rates around 5%, something we can still live with," said Astrid Schilo, economist at HSBC in London. "The real test case will come in Q4 / Q1, when the cooling of the U.S. economy can be expected to spill over into the euro zone."