16 January 2003 | Robin Parker
UK manufacturing industry suffered the double blow of falling orders and dwindling consumer demand before Christmas.
The sector contracted for the second time in 10 months in December, according to the CIPS/NTC Research purchasing managers' index (PMI). This was due largely to a decline in new orders, the index for which fell from 52.2 to 49.9, below the 50 mark that indicates no change.
Purchasers blamed falling orders on a difficult export market, mainly an unfavourable exchange rate with the US dollar and poor economic conditions in key European markets.
In the services sector, backlogs of work fell at their sharpest rate in a year, but the level of new business wins was at its weakest since February.
The figures were echoed across Europe, where purchasers in manufacturing reported the sharpest drop in new orders since last January. Spain faced the steepest decline, then Germany and the Netherlands, according to NTC Research's euro-zone PMI.
Confederation of British Industry figures added to the woe, suggesting consumer spending in the fortnight before Christmas was at its lowest in a decade. More than a third of the retailers surveyed said year-on-year sales were down.
But there are strong signs of growth in the US, where new orders grew at the fastest rate in more than 20 years. In the Institute for Supply Management's (ISM) report on business for manufacturing, the new orders index rose 13.4 points in December, from 49.9 to 63.3.
Norbert Ore, chair of the ISM manufacturing business survey committee, said that the signs were encouraging.
"These may provide momentum for the first quarter as companies start to see some improvement," he said.