UK factory activity sees new dip

Car manufacturers have been more positive in recent weeks

Activity in the UK manufacturing sector continued to decline in September, a survey has indicated.

The Chartered Institute of Purchasing & Supply (CIPS) index fell to 49.5 in September from 49.7 in August.

A figure below 50 implies contraction rather than growth. Last month's figure was the second monthly fall in a row.

The decline surprised analysts, who had forecast a return to growth. UK shares fell after the survey came out, but the pound was little moved on the day.

Dip 'marginal'

"With analysts expecting a figure over 50, representing industry expansion, this latest data will certainly disappoint UK officials," said Duncan Higgins, senior analyst at Caxton FX.

"However, it must be noted that the manufacturing industry has made a significant rebound from the unprecedented lows hit late last year.

"The dip is also relatively marginal and is unlikely to detract from expectations that the UK emerged from recession in the third quarter."

For their part, the survey's compilers said the underlying trend pointed to recovery.

"The picture is one of consolidation, not contraction," said Rob Dobson of Markit, which carried out the survey on behalf of CIPS.

"New orders are rising, sterling is supporting export sales as overseas markets improve and the key orders-inventory ratio remains at an elevated level."

However, he added that the outlook was still uncertain, "given the current reliance on price discounting and fiscal support".