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July 1, 2010    

UK manufacturing activity drops from 15-year high in June

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by Kay Murchie

The CIPS/Markit manufacturing purchasing managers’ index (PMI) has today revealed UK manufacturing activity slowed from its 15-year high in June.

The closely-watched CIPS/Markit manufacturing PMI dipped from 58 in May to 57.5 in June.

The dip suggests the sector’s recovery may have peaked but it is still above the crucial 50 mark, which represents growth, and was in line with forecasts.

Commenting on the figures, Rob Dobson, senior economist at Markit, said: “The rate at which the sector has been recouping the output lost during the recession has been nothing short of remarkable, with around one third having been recovered by the end of June.”

“However, the latest survey offered signs that conditions may have passed their peak … With the impact of austerity measures on demand both here and abroad still unknown, the latter half of the year may provide a real test for the sustainability of the recovery,” he added.

Meanwhile, Philip Shaw, chief economist at Investec, added: “It could be a one-off or it could be something more fundamental. “We’ll have to gauge next month’s survey and other evidence to determine if this is the case.”

In the meantime, the PMI survey showed export orders growth came to a standstill with the export orders sub-index plunging from 56.7 in May to 50.7 last month - the lowest level since August 2009.

In related news, the Office for National Statistics (ONS) was due to publish its third and final estimate of the UK’s first quarter GDP figures yesterday, but due to a “potential error”, the data will be delayed.

According to the ONS, the unusual move was caused by concerns over the reliability of some of the data.

Gross Domestic Product (GDP), a key measure of economic growth, is closely watched by economists as an indication of the health of the economy.

The ONS will now publish its third and final estimate of first quarter economic growth on July 12.

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