British manufacturing activity grew at its slowest pace in 20 months in May and mortgage approvals unexpectedly fell to their lowest since December, underscoring the fragile state of the UK recovery.
The Markit/CIPS manufacturing PMI headline index fell to 52.1 last month from a downwardly revised 54.4 in April, well below the 54.1 consensus forecast, data showed today.
The worst headline reading since September 2009 was blamed on a weaker domestic market, particularly for consumer goods, the slowest growth in export orders in eight months and the effect of extra public holidays.
Separate figures from the Bank of England showed mortgage approvals for house purchase fell to 45,166 in April, down from 47,145 in March - well below forecasts for a broadly stable reading and the lowest since December last year.
The surprisingly weak figures will reinforce worries about the resilience of Britain's economy at a time of public spending cuts, high inflation and uncertain consumer demand. Sluggish growth in the first quarter has fuelled speculation the Bank of England will delay raising interest rates from a record low of 0.5% until around the turn of the year to let the recovery gather pace.
Manufacturing, which accounts for around 13% of UK economic output, had been one of the few success stories during a slow return to growth after a recession that ended late in 2009.
'The UK PMI suggests that manufacturing has moved from rapid expansion to near-stagnation,' said Rob Dobson, senior economist at survey compiler Markit. 'Domestic market weakness was the main drag on order books and output,' he said.
The slowdown hit consumer goods producers and smaller manufacturers the hardest, and there was disruption to supply chains from Japan's earthquake and tsunami, Dobson added.
The headline PMI index has stayed above the 50 level that separates growth from contraction for 22 consecutive months. But the output index nudged into negative territory at 49.9 for the first time since May 2009, while the new orders index contracted for the first time since June 2009.
The Bank of England lending figures are likely to reinforce expectations that house prices will continue to edge lower this year.
A rise in credit card borrowing pushed up consumer spending more than forecast, though it was inflated by one-off effects such as an extra holiday for the Royal Wedding, which also boosted retail sales in April.
