“Today’s industrial sentiment survey for July will only add to concerns that the UK may be sliding toward a fresh economic downturn, as the official reading of 48.2 has undershot even the “flash” figure of 49.1 released late last month,” said Russ Mould, investment director at AJ Bell.
Levels of production and incoming new orders both contracted in the UK manufacturing sector in Q3, as the impact of increased business uncertainty on the domestic market offset an exchange rate supported increase in new export business.
The seasonally adjusted PMI was at its lowest level since February 2013.
“This disappointing score increases the importance of the construction and services PMIs, which are due on Tuesday and Wednesday,” said Mould. “The drop to below 50 on all three counts is worrying, as it suggests the EU referendum vote has knocked corporate sentiment – even if only time will tell if this turns into lower investment plans, hiring freezes or even headcount cuts,” he continued.
Mould went on to note that the trends in all three PMI surveys had however been clearly lower before the ballot on 23 June.
“So even if the cloud cast by the Brexit decision lifts, it is possible the UK economy had already begun to lose momentum, despite the encouragement offered by the second-quarter GDP growth number released last week, a figure which will be subject to two further revisions,” he said.
“Purchasing activity took a backwards leap with the sharpest drop since March 2013, as falls in both output and new orders battered the sector”, said David Noble, group chief executive officer at the Chartered Institute of Procurement & Supply. “Though these falls were not as marked as those seen during the Great Recession in 2007-2008, the drop was harsher than expected,” added Noble.
