RTTNews - UK manufacturing sector unexpectedly shrunk in August, a key survey by the Chartered Institute of Purchasing and Supply and Markit Economics said on Tuesday.

The manufacturing Purchasing Managers' Index or PMI dropped to 49.7 in August from 50.2 in the previous month. The July reading was revised from 50.8 reported initially.

Economists were looking for a higher reading of 51.5 for August. A reading above 50 indicates expansion, while a level below 50 signals a contraction.

Manufacturing production increased for the third consecutive month in August, rising at the fastest pace since December 2007, the report said. However, new orders rose for the second month, though the increase was slower than the previous month, while export orders stabilized in August.

Further, the survey found historically rapid reductions in stocks of purchases and finished goods. While, job losses were reported for the 16th straight month, the rate of decline in employment, though substantial, was the slowest since June 2008.

David Noble, Chief Executive Officer at the CIPS, said, The future picture for the UK manufacturing sector is still uncertain, and concerns will remain that the improvements seen in recent months may have been temporary rather than a sustainable recovery.

The slower growth of new orders, continued substantial job losses and the surprising weakness exhibited by the investment goods sector are all causes for concern, Rob Dobson, Senior Economist at Markit said.

The recovery is likely to continue, but may become more muted later in the year once the initial rebound and monetary and fiscal stimuli have run their course.

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