Week 22, 2012: UK Manufacturing

Summary: According to figures released this morning, last month UK manufacturing suffered the sharpest contraction in 3 years.

What does the chart show? The Manufacturing PMI (Purchasing Manager's Index) measures the growth of activity of purchasing managers in the manufacturing sector - generally considered one of the best measures of the health of manufacturing. It does this by surveying over 600 industrial companies about their purchasing plans. A number over 50 represents growth in the sector, and a number under 50 represents contraction. The full report can be read here.

Why is the chart interesting? Manufacturing clearly contracted sharply during the initial recession of 2008, but appeared to bounce back strongly during 2010 and the beginning of 2011. In May 2012, however, the Manufacturing PMI was at its lowest point since March 2009, suggesting that industry has reacted badly to news that we are now in a double-dip recession. This in turn is likely to have a further negative impact on GDP.