From the Chartered Institute of Purchasing & Supply:

Key points:

• Manufacturing output rose at fastest pace since December 2007.
• New orders rose at slower pace. Level of new export business stabilised.
• Further job losses and inventory cutbacks reported.

At 49.7 in August, the seasonally adjusted CIPS/Markit UK Manufacturing Purchasing Managers’ Index® (PMI®) moved back below the no-change mark of 50.0. The headline PMI fell from a downwardly revised figure of 50.2 in July (previously reported as 50.8).

David Noble, Chief Executive Officer at the Chartered Institute of Purchasing & Supply, said:

“The future picture for the UK manufacturing sector is still uncertain, and concerns will remain that the improvements seen in recent months may have been temporary rather than a sustainable recovery. Though August saw the trend in output build on the momentum gained at mid-year, the moderation in the rate of new order growth is worrisome. The investment goods sector in particular showed surprising vulnerability, as domestic and foreign demand for UK capital products fell back following gains in July.

“On the back of subdued global demand coupled with strong competition, deflation is still a concern as output prices continued to fall. Subsequently, firms streamlined their practices and reduced levels of stock. Purchasing managers also reported that workforces were trimmed further along with excess capacity and costs, particularly amongst larger-sized manufacturers.”

Rob Dobson, Senior Economist at Markit said:

“The latest UK Manufacturing PMI data are a mixed bag. The recovery in output continued to strengthen with growth at its highest since December 2007 and coming from a broad sector and company-size base. Also positive were the forward looking orders-to-inventory ratio hitting a five-and-a-half year high, export orders stabilising and indications that the inventory cycle will remain supportive. However, the slower growth of new orders, continued substantial job losses and the surprising weakness exhibited by the investment goods sector are all causes for concern. The recovery is likely to continue, but may become more muted later in the year once the initial rebound and monetary and fiscal stimuli have run their course.”

Eurozone unemployment also marches towards 10%.   Futures are taking a turn for the worse: