Fall in Dollar Undermines Manufacturing
Manufacturers in Britain and Europe entered the new year in a dismal state, after the fall in the dollar undermined exports to the American market last month, new surveys showed yesterday. The Chartered Institute for Purchasing and Supply blamed the dollar's slide for the first fall below...
Manufacturers in Britain and Europe entered the new year in a dismal state, after the fall in the dollar undermined exports to the American market last month, new surveys showed yesterday.
The Chartered Institute for Purchasing and Supply blamed the dollar's slide for the first fall below 50 in its key activity indicator for UK manufacturing since July. Readings below 50 signal that the sector is contracting.
"Total order books were reported to have been undermined by the uncompetitive nature of UK manufacturers abroad. US dollar markets were reported to have been particularly tight, owing to the weakness of the American currency," CIPS said.
Sterling rose 4% against the dollar in December and is up more than 10% on a year ago.
The overall PMI index slipped to 49.5% from 50.1 in November, the first reading below the 50 level since July, prompting fears that weak recovery at the end of last year may already be running out of steam. "This is pretty gloomy and supports the idea that the sector is heading back into recession," said Jonathan Loynes at consultancy Capital Economics. "And it is not just global demand that is causing the trouble but industry just cannot compete at these exchange rate levels."
Germany led the decline in mainland Europe where the activity index fell to 48.4 from 49.5 in November.
The gloomy figures from the UK and the EU contrasted with a surprise rebound in manufacturing output in America which prompted a new year's rally on Wall Street.
Blue chip share prices leapt 200 points after Institute for Supply Management reported its activity index jumped to 54.7 in December from 49.2 the previous month. But even the ISM was sceptical about its figures, warning that the magnitude of the improvement was difficult to explain, while analysts suggested the recovery could be a false dawn.
"The extreme size of the jump almost surely overstates the improvement," said Banc of America Securities senior economist Peter Kretzmer.
President Bush said yesterday that measures to help job creation would be at the heart of his new year's economic stimulus package, which is thought likely to include tax cuts of up to $300bn.
The White House is determined to prevent a rise in the jobless figures from undermining US consumer confidence.
The Chartered Institute for Purchasing and Supply blamed the dollar's slide for the first fall below 50 in its key activity indicator for UK manufacturing since July. Readings below 50 signal that the sector is contracting.
"Total order books were reported to have been undermined by the uncompetitive nature of UK manufacturers abroad. US dollar markets were reported to have been particularly tight, owing to the weakness of the American currency," CIPS said.
Sterling rose 4% against the dollar in December and is up more than 10% on a year ago.
The overall PMI index slipped to 49.5% from 50.1 in November, the first reading below the 50 level since July, prompting fears that weak recovery at the end of last year may already be running out of steam. "This is pretty gloomy and supports the idea that the sector is heading back into recession," said Jonathan Loynes at consultancy Capital Economics. "And it is not just global demand that is causing the trouble but industry just cannot compete at these exchange rate levels."
Germany led the decline in mainland Europe where the activity index fell to 48.4 from 49.5 in November.
The gloomy figures from the UK and the EU contrasted with a surprise rebound in manufacturing output in America which prompted a new year's rally on Wall Street.
Blue chip share prices leapt 200 points after Institute for Supply Management reported its activity index jumped to 54.7 in December from 49.2 the previous month. But even the ISM was sceptical about its figures, warning that the magnitude of the improvement was difficult to explain, while analysts suggested the recovery could be a false dawn.
"The extreme size of the jump almost surely overstates the improvement," said Banc of America Securities senior economist Peter Kretzmer.
President Bush said yesterday that measures to help job creation would be at the heart of his new year's economic stimulus package, which is thought likely to include tax cuts of up to $300bn.
The White House is determined to prevent a rise in the jobless figures from undermining US consumer confidence.
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