UK manufacturing sees worst growth in nearly two years

Jaguar assembly plantThe UK manufacturing sector grew at its slowest pace in nearly two years in June, according to the Markit/CIPS Manufacturing PMI [purchasing managers index], which sank to 51.3, down from 52.0 in the previous month.

Investors will be watching the index carefully for further losses. If the index falls below 50, it indicates the sector is contracting.

Chris Williamson, chief economist at the financial data provider Markit, said: “The near-stagnation signalled by the index represents a steep deterioration in the performance of the sector since the surging growth seen at the start of the year. The decline reflected an ongoing weakness of domestic demand, but also a worrying near-stagnation of new export orders.”

Williamson said the Japanese earthquake may be partly to blame as it disrupted supply chains throughout the globe. This suggests UK exports will improve as Japan continues its reconstruction efforts.

However, poor consumer demand in the US and in important European markets may continue to hurt UK exports.

©2011 funds europe