–Adds Detail, Analyst Reaction To Version Transmitted At 0849 GMT
–UK Aug CIPS Manufacturing PMI 54.3 Vs July 56.9 – Reuters

LONDON (MNI) – The UK manufacturing sector’s rate of expansion
slowed sharply in August, with the data suggesting third quarter
manufacturing output will be markedly weaker than in the second.

The August Markit/Chartered Institute of Purchasing and
Supply index, published by Reuters, came in at 54.3, down from 56.9 in
July, which was revised down from an earlier 57.3 estimate.

Analysts had expected a median 56.9, according to a Market News
survey.

The Q3 average outturn for CIPS stands at 56.3, well below the 57.9
recorded in Q2.

August’s 54.3 outturn marked a nine-month low, with output growth
slowing to an 11-month low and new orders and employment growing at
slower rates and purchase price inflation hitting a seven-month low.

“The latest PMI data provided further evidence that the expected
slowdown in the UK manufacturing recovery from its highs earlier in 2010
is underway,” Rob Dobson, senior economist at Markit, said.

“Taken alongside the Eurozone figures published today, it looks as
if a broad industrial slowdown is occurring across much of the EU,” he
added.

The data will add to the widespread belief that the UK’s second
quarter 1.2% GDP growth is likely to prove the high point of the
recovery, with the pace of growth more subdued going forward.

One key component of Q2 GDP growth was restocking, and the CIPS
data show this is likely to slow in the manufacturing sector. The new
orders balance fell to 52.0 from 58.5.

CIPS said its August survey indicated UK manufacturing growth may
“ease further in coming months months, as the cyclically-sensitive new
orders-to-inventory ratio fell to a seventeen-month low.”

“Overall, the latest PMI survey will add to market jitters about
the risks of a double-dip. The slump in new orders is particularly
concerning. Whilst overall survey levels remain indicative of healthy
growth in Q3, the loss of momentum is the main news here,” Ross Walker,
economist at RBS said in a note.

–London newsroom 0044 207 862 7491; email:drobinson@marketnews.com

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