01 September 2008 | Paul Snell
Cost inflation and a lack of new business saw activity in the UK manufacturing sector continue to fall in August, although at a slower rate than in July.
According to the latest CIPS/Markit Purchasing Managers' Index, where a figure below 50 represents contraction, activity in the sector reached 45.9 last month, slightly higher than the nine-and-a-half-year low of 44.1 in July.
Although both new orders and output declined less quickly in August, both indicators remained below 50. The downturn in new orders slowed from 40.6 in July to 42.7 last month, with rising costs and poor economic conditions still affecting companies.
Output recorded 48.7 last month, from 43.2 in July, attributed to firms finishing backlogs of work. As a result, work in hand fell to a record low of 39.2 in August as spare capacity was diverted.
Output prices rose to a record high of 64.5 with manufacturers passing on the rising cost of raw materials to their customers. Input prices were slightly lower than in July at 79.3, but it was still the third highest reading in the survey's history.
Chinese government restrictions on production and transportation during the Olympics were blamed for the increase in supplier delivery times, which recorded 47.6 in August. Although below 50 for the thirty-ninth consecutive month, this was the slowest rate of decline in three years.
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