Although slide in the Britain’s manufacturing sector continued, its pace has slowed down a bit in January 2009. Purchasing Manager Index (PMI) released by the Chartered Institute of Purchasing and Supply (Cips) rose to 35.8 in January up from 34.9 in December. PMI is a measure of orders and output and the level above 50 is the indicator of rise.

While decline in pace of manufacturing slowdown is a welcome development, last month’s PMI was the third worst ever recorded by Cips.

According to Cips’s director Roy Ayliffe, manufacturing sector reported weak opening to 2009. Whopping rate of job cuts, 30,000 a month, indicated gloomy picture ahead.

British manufacturers’ collapse is caused by sharply falling demand at home and overseas due to numerous domestic and international factors.

Ayliffe added that new export orders could not be propped up in January because of precarious conditions created by weaker sterling exchange rate. While downturn in overseas demand offset benefits, on domestic front 60% of manufacturers reported fall in orders.

Howard Archer, chief European and UK economist at Global Insight, described slowing down of decline as better news, but warned that manufacturing was likely to contract for some time. According to him depressed domestic demand, weaker export activity, tough credit conditions and competition have been battering the UK manufacturing sector.

Investec’s chief economist, Philip Shaw, opines that marginal improvement in PMI should not stop the Bank of England’s Monetary Policy Committee from cutting interest rates again.

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