UK manufacturing activity shrank at its fastest pace in more than two years last month, hurt by a sharp drop in exports, data showed yesterday.

The Markit/CIPS manufacturing PMI headline activity index fell to 49.0 in August from 49.4 in July - the weakest level since June 2009 and the second straight month below the 50 line separating contraction from expansion, though slightly better than forecasts of 48.6.

Markit senior economist Rob Dobson said: "The second half has so far seen the UK manufacturing sector, once the pivotal cog in the economic recovery, switch into reverse gear."

The report supports expectations the Bank of England will leave interest rates at their record low of 0.5 percent next week. It may even ignite speculation the bank will consider more stimulus for the economy.

Monetary Policy Committee member Adam Posen this week called for central banks of all advanced economies to buy more financial assets to support growth. The US Federal Reserve has hinted it may consider a further cash injection.

Signs that price pressures are continuing to ease suggest inflation is heading down. The PMI survey showed input prices rose at their slowest pace in almost two years, while factory gate inflation was its lowest since last November.

Dobson said "This provides support to the Bank of England's belief that inflationary pressures are temporary and offer room for maneuver if any further stimulus is required."

The UK economy grew by just 0.2 percent from April to June and most analysts believe growth will remain muted for many more months.

Source:shanghaidaily