UK manufacturing sector contracts in July

The UK's manufacturing sector contracted in July for the first time in two years, a survey suggests.

The Markit/Cips manufacturing purchasing managers' index (PMI) for July fell to 49.1, down from a revised 51.4 in June. A figure below 50 indicates contraction.

The survey also reported job losses in the sector for the first time since March last year.

New business also declined sharply due to weak domestic demand, Markit said.

"Alarm bells are ringing for the UK manufacturing sector, which has seen conditions deteriorate rapidly since the start of the year," said David Noble, chief executive of the Chartered Institute of Purchasing & Supply, which helps compile the survey.

"Weaker consumer demand, sluggish domestic orders and a conservative approach to inventory holdings are weighing down the overall health of the sector."

There were, however, two positive findings in the report. The weak pound is still supporting exports, Markit said, while inflation in input costs slowed.

Weak growth

The report fuelled concerns about the strength of the UK economic recovery.

"I worry this recovery is running out of steam," said Alan Clarke of Scotia Capital.

"The government is cutting back, consumers are not spending and we are seeing a slowing in overseas demand."

Earlier on Monday, employers' group the CBI lowered its forecast for the UK's GDP in 2011, predicting growth of 1.3%, down from its previous prediction of 1.7% made in May.

Last week, the Office for National Statistics said the UK grew by 0.2% in the three months to 30 June, down from 0.5% in the previous quarter.