UK may face Longer Economic Recession
UK weakness reflected across Europe as manufacturing slump becomes entrenched in France and Germany. The UK’s manufacturing output slumped in May, heightening fears that the UK’s six-month-old recession will extend into the summer rotary kiln. New orders fell at their fastest level since 2009 as output dived and manufacturers scrambled to complete existing orders to keep their factories busy and delay laying off workers.
Analysts blamed the weakness of the UK market along with the deteriorating crisis in the eurozone for the fall in sales and new orders. They said the Bank of England could restart its programme of printing electronic money as early as this month in response to the UK government’s decision vibrating screen to stick with its deficit-cutting agenda. The miserable picture in the UK was reflected across Europe after a manufacturing slump that has already undermined the recoveries in the southern half of the continent became entrenched in France and Germany. Oil prices dipped and stock markets were down as investors digested the news and prepared for the crisis to deepen. Without a clear plan from Brussels, Paris and Berlin over how to exit the crisis, manufacturers are expected to continue cutting orders and jobs over the coming months.
The survey of UK manufacturers, which also showed firms laying off staff for the first time in six months, and a marked slowdown in firms’ raw materials costs and factory gate prices, could help to tip the balance in favour of more quantitative easing (QE). Vicky Redwood, chief UK economist at Capital Economics, said the Bank of England could add to its £325bn of QE in June in response to worsening situation: ‘Since May’s meeting, the case for providing more stimulus has strengthened. Most importantly, the eurozone crisis has intensified. While sentiment towards Greece has improved a touch, concerns about the Spanish banking system have grown.sand maker:http://www.hx-crusher.com/
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In a further sign of the darkening economic outlook, the British Chambers of Commerce said it cut its 2012 GDP growth forecast to 0.1% from 0.6%. Over a third of companies surveyed by Markit reported lower new orders in May, with that index falling by seven points to 42.0 – its lowest since Britain was in recession in the immediate aftermath of the 2008 financial crisis.
Lee Hopley, chief economist at EEF, the manufacturers’ association, blamed the marked deterioration in activity and confidence across Europe for the dramatic fall in the UK’s output. But said there were still some bright spots in amongst the gloom. ‘The sector is a very varied and agile one and some sectors with longer order books, and a diversified customer base, will not necessarily recognise the declining trends indicated by the survey.’ The eurozone’s manufacturing sector also contracted at its steepest pace in nearly three years last month after the headline PMI figure 17-member currency club dropped to 45.1 from 45.9 in April. ‘The data indicates that the sector is contracting at a quarterly rate of around 1%, suggesting that manufacturing will act as a major drag on economic growth in the second quarter,’ said Chris Williamson, chief economist at Markit.
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