Manufacturing returns to contraction

One phrase is on everyone's mouths, and it rhymes with schmiple schmip.

It's the first of the month, and that means it's PMI day, our chance to find out the first indication of how the economy performed in the last month. Our first indication is: it performed badly.

The Markit/CPS manufacturing index, which provides an indication of activity across the manufacturing sector, fell markedly, recording 47.9 down from 50.5 last month. A number below 50 indicates contraction in the sector, and this is the first time manufacturing has posted such a result since last November:


Markit adds:

New orders fell for a second successive month – and at an accelerated pace. The latest fall was the sharpest since last July amid reports of tough market conditions both at home and abroad. Poor weather was also mentioned as a factor negatively impacting on order book volumes.

Compared to last month's mildly positive figures, the news is bad indeed, and it's led to a strong sell-of in sterling amid fears it indicates a return to rescission for Britain. Here's GBP/USD:


and GBP/JPY:


Ouch. Chris Williamson, Markit's chief economist, writes:

The return to contraction of the manufacturing sector is a big surprise and represents a major set- back to hopes that the UK economy can return to growth in the first quarter and may avoid a triple-dip recession.

The data so far this year point to manufacturing output falling by as much as 0.5%, meaning a strong rebound is needed in March to prevent the sector from acting as a drag on the economy as a whole in the first quarter.

The one positive note was that the market in investment goods strengthened slightly, a necessary improvement if the economy is to improve in the long-term.

George Osborne inspects some manufacturing. Less of it is happening now than before. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Photo: Getty Images
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The buck doesn't stop with Grant Shapps - and probably shouldn't stop with Lord Feldman, either

The question of "who knew what, and when?" shouldn't stop with the Conservative peer.

If Grant Shapps’ enforced resignation as a minister was intended to draw a line under the Mark Clarke affair, it has had the reverse effect. Attention is now shifting to Lord Feldman, who was joint chair during Shapps’  tenure at the top of CCHQ.  It is not just the allegations of sexual harrassment, bullying, and extortion against Mark Clarke, but the question of who knew what, and when.

Although Shapps’ resignation letter says that “the buck” stops with him, his allies are privately furious at his de facto sacking, and they are pointing the finger at Feldman. They point out that not only was Feldman the senior partner on paper, but when the rewards for the unexpected election victory were handed out, it was Feldman who was held up as the key man, while Shapps was given what they see as a relatively lowly position in the Department for International Development.  Yet Feldman is still in post while Shapps was effectively forced out by David Cameron. Once again, says one, “the PM’s mates are protected, the rest of us shafted”.

As Simon Walters reports in this morning’s Mail on Sunday, the focus is turning onto Feldman, while Paul Goodman, the editor of the influential grassroots website ConservativeHome has piled further pressure on the peer by calling for him to go.

But even Feldman’s resignation is unlikely to be the end of the matter. Although the scope of the allegations against Clarke were unknown to many, questions about his behaviour were widespread, and fears about the conduct of elections in the party’s youth wing are also longstanding. Shortly after the 2010 election, Conservative student activists told me they’d cheered when Sadiq Khan defeated Clarke in Tooting, while a group of Conservative staffers were said to be part of the “Six per cent club” – they wanted a swing big enough for a Tory majority, but too small for Clarke to win his seat. The viciousness of Conservative Future’s internal elections is sufficiently well-known, meanwhile, to be a repeated refrain among defenders of the notoriously opaque democratic process in Labour Students, with supporters of a one member one vote system asked if they would risk elections as vicious as those in their Tory equivalent.

Just as it seems unlikely that Feldman remained ignorant of allegations against Clarke if Shapps knew, it feels untenable to argue that Clarke’s defeat could be cheered by both student Conservatives and Tory staffers and the unpleasantness of the party’s internal election sufficiently well-known by its opponents, without coming across the desk of Conservative politicians above even the chair of CCHQ’s paygrade.

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.