British manufacturing activity contracted for the first time in almost two years in April after the collapse of car company MG Rover dealt a blow to suppliers.
The Chartered Institute of Purchasing and Supply/NTC Research said today its purchasing managers' index (PMI) fell to 49.5 last month, its lowest reading since June 2003, from 51.6 in March.
This is below expectations of 51.5. Any reading above 50.0 indicates expansion; anything below that level means contraction.
Similar surveys published yesterday showed that manufacturing in the euro zone contracted for the first time in nearly two years; manufacturing growth in the United States slowed to its weakest pace in almost two years.
The figures boosted expectations that the Bank of England will leave interest rates steady at 4.75 per cent next week for the ninth month running and heightened anxiety that the fragile recovery in manufacturing is running out of steam.
The drop in manufacturing activity was mainly due to a shortfall in new orders leading to a slowdown in production. MG Rover, the 100-year old carmaker which once produced the Mini and Land Rover, went bankrupt last month after a deal with a Chinese company fell through.
High oil, steel and plastic prices continued to push up input costs but not as quickly as in previous months.
The input price index fell to its lowest level since February 2004 at 62.5. But output price growth picked up to a faster, although still modest, pace, with the index rising to 51.6 from 50.9 in March. New export orders eased for the fourth straight month at 49.2, mainly due to stronger competition from China and Japan along with weaker demand from the euro zone.
British manufacturing employment also declined in April at 47.3, after showing a modest increase in March at 51.6 for the first time in four months. Slower production growth and cost-cutting led to the reduction in work levels.
The output index fell to 51.3 in April from 52.7 in March, registering expansion for the 23rd consecutive month, but the growth was mainly due to already existing contracts.