High Political and Economic Uncertainty Drags UK Manufacturing Sector – ZMR Blog
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High Political and Economic Uncertainty Drags UK Manufacturing Sector

Manufacturing activity in the United Kingdom is seen to shrink in the month of August.

The Purchasing Managers Index, according to the HIS Markit/CIPS data shows that the manufacturing sector has contracted to 47.4 in August. It is down from last month’s value of 48. Any figure less than 50 is an indication that there is a contraction in the sector. Market expectations were at 48.4 for the month of August.

The fall has been the steepest in seven years. The Brexit uncertainty is the cause for the sharp contraction, while the global slowdown is also a reason, feel analysts.

HIS Markit Director Rob Dobson says, “High political and economic uncertainty has stifled the manufacturing sector’s performance in the UK for the month of August. There is a global trade tension which is bringing in economic disturbances”.

For the second quarter of this year, the United Kingdom has contracted by 0.2 percent, showing that the economy faces a deep contraction. This sharp fall is the first time since 2012.

If there is a contraction for this quarter too in the United Kingdom, it will pull the economy into a recession, as it will show a contraction for two quarters continuously.

However, Howard Archer who is the chief economic adviser at the EY Item Club says that the CEPS surveys are highly sensitive to the prevailing political uncertainty. The performance in the manufacturing sector is not that grim. He further states that the rest of the year will be difficult for manufacturers with no easing coming from global and domestic headwinds.

Mr. Dobson says, “According to the PMI results, the manufacturing sector, which contributes to around 20 percent of the United Kingdom’s economy is contracting by almost 2 percent at a quarterly pace”.

Meanwhile, the pound slid with weakness coming in from the manufacturing sector. The Sterling was down by almost half a percent against the dollar.

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