Manufacturing survey scores declined in all but one of the G7 countries last month, with factory sectors actually contracting in the UK and the Eurozone.
Manufacturing growth in the UK plummeted to a 26-month low in August, according to the latest purchasing managers’ index (PMI).
New export orders suffered the most devastating collapse since May 2009, with companies reporting weaker demand from the US and the rest of Europe. The British sector had been expanding healthily until early this year, with analysts hoping it could drive the recovery forwards.
Yet since January the index has shed 12 points. The only steeper drop in its 20-year history was in the aftermath of the Lehman Brothers collapse.
“Recent months have seen a steep deterioration in growth of key overseas markets, especially in the Eurozone,” said Chris Williamson of Markit, which compiles the data along with the Chartered Institute of Purchasing and Supply.
The UK sector slipped to a PMI score of 49, down from 49.4 in July. All scores under 50 signal economic decline.
Manufacturing also shrank in France (49.1) and Italy (47) – their lowest readings for over two years – while contraction was even more severe in Spain (45.3) and Greece (43.3).
New export orders from the Eurozone plummeted at their sharpest rate since January 2009.
In America and Germany, key manufacturing industries have ground to a halt, slipping to 50.6 and 50.9 respectively – close to stagnation.
While worse figures had been expected for the US, Williamson warned against complacency: “Make no mistake, this survey is still signalling a worryingly slow rate of growth,” he said. “The survey’s near-stagnation signalled the weakest performance since the US PMI rose above neutral 50 level in August 2009.”
New orders have shrunk for two straight months in the US, boding ill for the world’s largest economy.
In China, however, manufacturing PMI rose slightly, by 0.2 points, in August, yet remains at an unspectacular 50.9 as concerns about the global economy linger.
Brazil’s central bank shocked onlookers this week by slashing its interest rates by 0.5 percentage points in one go, citing a “substantial deterioration” in the international outlook.
Meanwhile Germany’s second quarter GDP was yesterday confirmed at a depressingly sluggish 0.1 per cent.