U.K. manufacturing shrank at the fastest pace in 2 1/2 years in November as both domestic and overseas demand weakened.
A gauge of factory output, based on a survey by Markit Economics and the Chartered Institute of Purchasing and Supply, fell to 47.6 from 47.8 in October, according to an e-mailed report in London today. The median forecast of 26 economists in a Bloomberg News survey was for a decline to 47. A level below 50 indicates contraction. New orders fell for a fifth month.
Manufacturers are suffering as the sovereign debt crisis jeopardizes the outlook for exports to Europe, Britain’s biggest trading partner, and the global economy cools. China’s manufacturing contracted for the first time since February 2009 last month as the property market cooled and Europe’s crisis cut export demand, a separate survey today showed.
“It looks like it’s going to be a bleak winter for U.K. manufacturers,” CIPS Chief Executive Officer David Noble said in a statement. “Exports orders, which U.K. manufacturers are increasingly dependent on, continue to decline as the euro zone crisis impacts demand in U.S. and Asia as well as Europe.”
Edinburgh-based semiconductor maker Wolfson Microelectronics Plc said Nov. 1 revenue dropped 14 percent in the third quarter from a year earlier, and that “weak consumer demand” has prevented a return to full-year profitability.
The U.K.’s Office for Budget Responsibility cut its 2012 economic growth forecast to 0.7 percent from 2.5 percent this week. Bank of England Governor Mervyn King said Nov. 28 the U.K. is “increasingly threatened” by the crisis in Europe.
Policy makers have been counting on the weaker pound to bolster exports and drive the recovery as the government affirms its commitment to the biggest fiscal squeeze since World War II. The pound has dropped about 25 percent on a trade-weighted basis since the start of 2007.
The Bank of England, the Federal Reserve and four other central banks yesterday pledged to lower the cost of emergency dollar funding for financial companies by 50 basis points in a coordinated move to ease liquidity strains. The cost for banks in Europe to fund in dollars rose to the highest levels in three years amid concerns about a breakup of the euro area.
The Purchasing Managers’ Index for China fell to 49.0 in November from 50.4 in October, the China Federation of Logistics and Purchasing said in a statement today. The median estimate in a Bloomberg News survey of 18 economists was 49.8.