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
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PMQs review: Jeremy Corbyn prompts Tory outrage as he blames Grenfell Tower fire on austerity

To Conservative cries of "shame on you!", the Labour leader warned that "we all pay a price in public safety" for spending cuts.

A fortnight after the Grenfell Tower fire erupted, the tragedy continues to cast a shadow over British politics. Rather than probing Theresa May on the DUP deal, Jeremy Corbyn asked a series of forensic questions on the incident, in which at least 79 people are confirmed to have died.

In the first PMQs of the new parliament, May revealed that the number of buildings that had failed fire safety tests had risen to 120 (a 100 per cent failure rate) and that the cladding used on Grenfell Tower was "non-compliant" with building regulations (Corbyn had asked whether it was "legal").

After several factual questions, the Labour leader rose to his political argument. To cries of "shame on you!" from Tory MPs, he warned that local authority cuts of 40 per cent meant "we all pay a price in public safety". Corbyn added: “What the tragedy of Grenfell Tower has exposed is the disastrous effects of austerity. The disregard for working-class communities, the terrible consequences of deregulation and cutting corners." Corbyn noted that 11,000 firefighters had been cut and that the public sector pay cap (which Labour has tabled a Queen's Speech amendment against) was hindering recruitment. "This disaster must be a wake-up call," he concluded.

But May, who fared better than many expected, had a ready retort. "The cladding of tower blocks did not start under this government, it did not start under the previous coalition governments, the cladding of tower blocks began under the Blair government," she said. “In 2005 it was a Labour government that introduced the regulatory reform fire safety order which changed the requirements to inspect a building on fire safety from the local fire authority to a 'responsible person'." In this regard, however, Corbyn's lack of frontbench experience is a virtue – no action by the last Labour government can be pinned on him. 

Whether or not the Conservatives accept the link between Grenfell and austerity, their reluctance to defend continued cuts shows an awareness of how politically vulnerable they have become (No10 has announced that the public sector pay cap is under review).

Though Tory MP Philip Davies accused May of having an "aversion" to policies "that might be popular with the public" (he demanded the abolition of the 0.7 per cent foreign aid target), there was little dissent from the backbenches – reflecting the new consensus that the Prime Minister is safe (in the absence of an attractive alternative).

And May, whose jokes sometimes fall painfully flat, was able to accuse Corbyn of saying "one thing to the many and another thing to the few" in reference to his alleged Trident comments to Glastonbury festival founder Michael Eavis. But the Labour leader, no longer looking fearfully over his shoulder, displayed his increased authority today. Though the Conservatives may jeer him, the lingering fear in Tory minds is that they and the country are on divergent paths. 

George Eaton is political editor of the New Statesman.

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