UK manufacturing activity plummeted unexpectedly in May at the fastest pace since the depths of the 2008/09 downturn, according to a key index which showed its second-sharpest fall in two decades, fuelling fears of continued recession.
The Chartered Institute of Purchasing and Supply's (CIPS') headline purchasing managers' index for manufacturing, a composite measure of activity which includes output, new orders, employment, suppliers' delivery times, and stocks of goods purchased, tumbled from 50.2 in April to 45.9 in May on a seasonally-adjusted basis.
This was the second-steepest monthly fall in this index in the 20-year history of CIPS' manufacturing survey. It took the PMI below the level of 50 which separates expansion from contraction for the first time since last November, and the latest reading signals the fastest contraction of manufacturing activity since May 2009.
CIPS' survey, produced by Markit and published yesterday, showed manufacturing output fell sharply last month and new orders plunged. Domestic and export orders fell sharply, as did backlogs of work, and the sector posted its first overall fall in employment since December.
The manufacturing output index fell from 51.7 to 47.6 – to signal the first fall for six months. New orders fell at their fastest pace since March 2009, having declined modestly in April after a series of increases.
There had been worries that second-quarter manufacturing activity would be weighed down by the extra holiday, on June 5, for the Queen's Diamond Jubilee, but the weakness of the May figures wrong-footed experts.
Ross Walker, economist at Royal Bank of Scotland, said: "This is a collapse. This is a huge decline. We're still a little bit above the lows we hit in the depths of the 2009 recession, but we're heading that way sharply.
"I do wonder if there's maybe been some early shutdowns related to the Jubilee holiday, because a decline on this scale is huge. It's hard to dispute that there's some real broad-based decline going on.
"It certainly suggests the economy is not going to bounce back in Q2, and we're already expecting a negative number (for gross domestic product) so it's consistent with that."
UK GDP fell by 0.3% in both the fourth quarter of 2011 and the opening three months of this year.
Howard Archer, chief UK economist at consultancy IHS Global Insight, said: "This is a really horrible survey and a real economic dampener ahead of the Queen's Diamond Jubilee celebrations. It makes very grim reading across the board, showing output contracting appreciably in May, domestic demand nosediving, export orders falling markedly... and employment falling anew."
He added: "The survey... indicates that further contraction in manufacturing output is highly likely in June, even stripping out any lost production resulting from the extra day's public holiday from the Diamond Jubilee.
"The depth of the manufacturing weakness in May increases the already appreciable risk that the economy will contract again in the second quarter."
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