UK manufacturers suffer 'toughest conditions in three years'

http://www.guardian.co.uk/business/2012/sep/03/uk-manufacturers-toughest-conditions-years

Version 0 of 1.

Manufacturers are suffering the toughest trading conditions in almost three years, according to an industry survey that punctures hopes of an Olympic boost to the economy.

The EEF, the manufacturers' organisation, says export growth slowed dramatically in the third quarter, while UK orders fell for the first time in more than two years.

Manufacturing data out on Monday is expected to add to the gloom, with the monthly purchasing managers' index likely to show the sector contracted in August. Services data out on Wednesday is expected to show some growth, although it may not be enough to lift the economy out of recession.

The latest official estimates showed the economy shrank by 0.5% between April and June, the third quarter in a row where economic output dropped. Policymakers had been hoping that a boost from the Olympic Games would help lift the economic gloom, but there is a mounting pile of evidence that suggests otherwise.

The data will be closely watched by the Bank of England, which meets on Thursday to discuss interest rates and any further stimulus to the economy. At the end of last week, the Federal Reserve chairman, Ben Bernanke, signalled his willingness to embark on a third phase of money creation to boost the US economy, but economists say the Bank of England is unlikely to follow suit. It is expected to keep rates on hold at 0.5% and make no increase to the quantitative easing programme of £375bn, as the bank waits to gauge the impact of stimulus programmes such as the Funding for Lending scheme.