The latest data from the CIPS/NTC Research survey of the UK manufacturing sector suggested that the weaker trend in operating conditions recorded during Q2 2005 continued at the start of the third quarter.

The seasonally adjusted Purchasing Managers' Index (PMI) registered 49.2 in July, down slightly from June. The latest sub-50.0 PMI reading reflected reduced new order volumes, ongoing labour market weakness and further inventory disinvestment.

After recovering slightly in June, the level of incoming new orders declined for the third time in the past four months during July. The seasonally adjusted New Orders Index recorded a level of 49.4, reflecting weaker demand from domestic clients.

July data pointed to further job losses in the UK manufacturing sector. The seasonally adjusted Employment Index posted a reading of 46.6, signalling the sharpest rate net workforce reduction for over two years.

Roy Ayliffe, Director of Professional Practice at CIPS, said: "Purchasing managers saw the poor performance of the UK manufacturing sector continue into the third quarter of 2005, reflecting ongoing difficult operating conditions. After recovering slightly in June, new orders declined for the third time in the past four months, highlighting weaker demand from the domestic market. A modest improvement was noted in manufacturing production in July, although the general consensus was that this reflected work on previously agreed contracts rather than a sustained recovery. "

www.ntc-research.com