U.K. Manufacturing Index Declined to 28-Month Low in October

A U.K. manufacturing index fell to a 28-month low in October as new orders decreased, adding to concerns the economy returned to stagnation in the fourth quarter.

The gauge, based on a survey by Markit Economics and the Chartered Institute of Purchasing and Supply, dropped to 47.4 from a revised 50.8 in September, according to an e-mailed report in London today. The median forecast of 29 economists in a Bloomberg News survey was for the measure to fall to 50. A level below 50 indicates contraction. New orders declined at the fastest pace since March 2009.

Reports suggest the economy has stalled after a third- quarter rebound as the crisis intensifies in the euro area, the biggest market for British goods, and the government pushes through the deepest spending cuts since World War II. European stocks fell after Greek Prime Minister George Papandreou pledged to hold a referendum on the European Union’s latest bailout plan, raising concern the nation may default.

“The manufacturing sector, which helped to keep growth buoyant earlier in the year, is now struggling to keep its head above water,” CIPS Chief Executive Officer David Noble said in a statement.

“Confidence is being hit hard as the sector feels pressure from all angles, with continued uncertainty in the euro zone being the main contributing factor as last week’s short-lived optimism fades,” he said.

While government figures today showed Britain’s economy rose 0.5 percent in the third quarter, Bank of England Markets Director Paul Fisher said the pace may not be sustained and there is a “50-50” chance the economy will shrink in the fourth quarter.

Wolfson Microelectronics Plc today posted a third-quarter loss. The Edinburgh-based company said in a statement that “weak consumer demand, along with some customer product delays, have impacted the company’s 2011 revenue growth expectations” and that it “expects headwinds for another couple of quarters.”

To contact the reporter on this story: Svenja O’Donnell in London at sodonnell@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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