UK factory PMI eases again, jobs fall for 1st time since 2013

LONDON, Oct 1 (Reuters) - - British factory activity cooled further in September and manufacturers trimmed staff levels for the first time in more than two years, a survey showed on Thursday, suggesting the sector continued to drag on the economy in the third quarter.

The purchasing managers' survey compiled by Markit supported

calls for the Bank of England not to raise interest rates until

manufacturing improves, said Rob Dobson, senior economist at

Markit.

The Markit/CIPS UK Manufacturing Purchasing Managers' Index

(PMI) slipped to 51.5 from 51.6 in August. While above the 50

threshold for growth, September's PMI was only just above a

two-year low hit in June.

Economists polled by Reuters had expected a slightly worse

reading of 51.3.

British factories have struggled this year. Official data on

Wednesday showed manufacturing output shrank 0.5 percent from

April through June while the much larger services sector

thrived.

Prices paid by manufacturers for raw materials and energy

plummeted at the fastest rate in more than 16 years, suggesting

producer prices are unlikely to pick up soon.

"The UK manufacturing sector remained sluggish at the end of

the third quarter, stunned by a triple combination of a sharp

slowdown in consumer spending, weak business investment and

stagnating export order inflows," Dobson said

The survey's jobs index slipped below the 50 mark for the

first time since April 2013, adding to signs that a phase of

strong employment growth in Britain has flattened out.

"Job cuts send a signal that manufacturers are becoming more

cautious about the future, which may lead to a further

scaling-back of production at some firms in coming months."

The survey's measures of output and exports brought better

news. New export orders rose - albeit only slightly - for the

first time in six months, while growth in output rose to its

highest level since March.

Net exports were the biggest driver of economic growth of

0.7 percent in the second quarter, according to official data,

although most economists reckon the boost from trade is likely

only temporary, especially given the strength of sterling.

"The (PMI) is still broadly consistent with stagnation, or

even a mild downturn, when compared to official data," said

Dobson.

Comparable surveys from Markit/CIPS for the construction and

services sectors are due in the coming days. They have shown

much healthier rates of growth in recent months.

A survey from Confederation of British Industry published

earlier on Thursday showed economic growth dipped slightly in

the three months to September.

(Reporting by Andy Bruce; Editing by Toby Chopra) (([email protected]; +442075423484; Reuters Messaging: [email protected])

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