“U.K. manufacturing grew at the slowest pace in almost two years in May as weak domestic demand led to a drop in production and new orders, a survey showed.
A gauge based on a survey by Markit Economics and the Chartered Institute of Purchasing and Supply declined to 52.1, the lowest since September 2009, from a downwardly revised 54.4 in April, according to an e-mailed report in London today. Output and new orders fell for the first time since the middle of 2009, and producers of consumer goods and smaller manufacturers were hit hardest.
The biggest government spending cuts since World War II are hurting consumer confidence, while accelerating inflation is squeezing incomes. Holidays for Easter and the royal wedding at the end of April and the impact of the Japanese earthquake and tsunami also hurt company orders.
“The fact that the output and new orders fell for the first time in two years does raise questions about where economic growth will come from,” Hetal Mehta, an economist at Daiwa Capital Markets Europe in London, said in an e-mailed note. “With that in mind, it is difficult to see how the Bank of England will be able to increase interest rates this year.”
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