Britain’s factories suffered the worst month in almost a year and a half in September, signalling that the strong run of growth at the start of the year is over.
Economists said uncertainty over the Scottish referendum, a flagging eurozone economy, and slowing domestic demand were all likely to have contributed to the weak performance, putting any remaining prospect of an interest rate rise in November firmly off the table.
The Markit/CIPS UK Manufacturing PMI, a closely watched survey which combines output, orders, employment and prices, fell to 51.6 in September from 52.2 in August, where anything above 50 indicates expansion. It was the slowest rate of growth since April 2013, and the third monthly drop in the index, disappointing City forecasters.
James Knightley, economist at ING, said: “This is a 17-month low and further diminishes the prospect of Bank of England policy tightening in November. One possibility is that the uncertainty generated by the close polls in the lead-up to the Scottish independence referendum made business cautious and therefore led to a delay in orders.”
New export orders barely grew, putting growth at the slowest rate in almost 18 months, further frustrating George Osborne’s ambition to rebalance the economy away from consumer spending and financial services towards manufacturing and exports.