Manufacturing still struggling in the weakened economy

Manufacturing continues to struggle as the sector recorded a decline for the second month in a row. New economic data is putting more pressure on the Bank of England to provide more cash to boost an already weakened economy.

Although The Purchasing Managers’ Index rose slightly to just over 48 it is still struggling to break through the magical 50 mark, the barrier that separates contraction from growth. The highly regarded PMI is closely watched by market analysts as they try to forecast likely growth in the months ahead.

Even with the London Olympics around the corner, analysts expect only mild growth and industry experts expect the Bank of England to stimulate the economy with an its asset purchase program. With inflation in decline, the bank will see little downside in such a move and is expected to inject around £50 billion into the markets.

With the economy technically in recession, another PMI for the service sector also shows weak growth and was effectively going through a period of stagnation. As manufacturers struggled to find markets for their products, it was likely they were cutting back on spending and tightening their own budgets.

The markets showed little reaction with expectations already factored into share prices. But the economic data will put pressure on an under-stress Government, which itself is implementing tight budgeting constraints on its own services as it fights a looming deficit which is one of the worst in history.

Instead, the Government has been trying to improve credit facilities for business, and provided stimulus for the housing sector in an effort to boost business around the country. Analysts are divided on whether basic infrastructure moves will be enough to revive a flagging economy with some predicting the Bank of England will be forced to intervene in a more fiscally direct way.