Britain's manufacturing sector shrank faster than expected last month and at its quickest for over two years as the slowdown in new orders intensified, a report said today.
The Chartered Institute of Purchasing and Supply/NTC Research's purchasing managers' index (PMI) fell from a revised 49.1 in April to 47.3 in May, showing British manufacturing contracting at a faster rate than its counterpart in the euro zone.
The British May PMI was way below the 49.8 that analysts expected and its lowest level since March 2003. A reading of 50.0 or above indicates an expansion, while below 50.0 signals a retraction.
The data are likely to increase expectations of a Bank of England interest rate cut before the end of the year, particularly as the report showed manufacturers were now cutting prices.
"Downward pressure on export orders is feeding through, but perhaps more importantly we've seen a big turnaround in the performance of the production of consumer goods since the start of the year. That is causing problems," Chris Williamson of NTC Research said
Manufacturing production declined for the first time in two years, with the component index for production hitting 47.9 in May, down from 50.7 in April.