Manufacturing sector's 28-month low fuels double dip recession fears
Double-dip recession fears have been fuelled after a key measure of the health of the UK manufacturing sector "dropped like a stone" to a 28-month low - despite better-than-expected GDP data providing a glimmer of hope.
A closely watched survey by Markit/CIPS, in which a score of under 50 represents contraction, dropped to 47.4 in October, down from 50.8 the previous month, and its lowest level since June 2009.
The report's authors said the most worrying aspect was that new orders declined at the quickest pace since March 2009.
Levels of output, new orders and employment were all lower than one month earlier as the crisis in the eurozone hit demand from overseas, while the UK market remained subdued.
And the sector has now signalled a deterioration in overall operating conditions for three out of the last four months.
The gloomy survey has increased fears the UK economy could contract in the final quarter of 2011, despite official figures showing GDP grew 0.5% in the three months to the end of September.
CIPS chief executive David Noble said the survey showed the sector's activity had "dropped like a stone" and the mood is "somewhat sombre".
He said: "The manufacturing sector, which helped to keep growth buoyant earlier in the year, is now struggling to keep its head above water."
Staffing levels fell for the fourth month running as backlogs of work showed further signs of drying up as new orders fell.
Rob Dobson, senior economist at Markit, said: "A marked recovery in the replenishment rate of order books is needed to prevent the renewed manufacturing downturn becoming embedded."