Manufacturing slide hints at fresh QE round

By PERRY GOURLEY
Published on 03/07/2012 00:00

ANOTHER wave of quantitative easing (QE) to kick-start the UK economy now looks even more likely following figures yesterday which showed the manufacturing sector contracted for the second straight month in June as new orders continued to fall.

Although the pace of decline eased in June after a steep drop in May, the eurozone crisis and slowing growth in the US and Asia took their toll on overseas orders in particular.

The sector also made job losses for the second month in a row, reflecting weak demand.

The latest reading from the Cips/Markit purchasing managers’ index suggests the sector’s output is set to decline at least 0.5 per cent in the second quarter of 2012, fuelling fears that the UK’s double-dip recession will continue. The sector also made job losses for the second month in a row, reflecting weak demand.

Nida Ali, economist at Ernst & Young’s Item Club, said: “The Bank of England was already leaning heavily towards extending QE this week and these figures will provide further pressure.”

The Bank is expected to top up the £325 billion it has already pumped into markets with a further £50bn when it meets on Thursday as falling inflation gives it more scope to support the battered economy.

Meanwhile, jobs across the eurozone were cut at the fastest rate in two-and-a-half years while German and Spanish manufacturing shrank at the fastest pace in three years.