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The pound tumbled tonight after mixed news on the economy cast doubt over prospects for recovery.
Sterling reversed early gains to stand down 0.59 cents to $1.6228 and 0.14 cents to €1.1348. The FTSE 100 index was also off 26.11 points to 4882.79 having fallen as low as 4836.
David Jones, chief market strategist at IG Index, said: “The latest batch of UK economic news has proved to be a little unsettling for those looking for further green shoots.
“The man in the street is still taking a cautious approach to spending and any perceived UK recovery is not being consumer led just yet.”
It came after a raft of economic data showed:
* The manufacturing sector slipped back into recession last month as firms cut jobs and growth in new orders stalled. The Chartered Institute of Purchasing and Supply (CIPS) said its headline measure of activity, where any reading below 50 represents contraction, fell from 50.2 in July to 49.7 in August.
* Mortgage approvals hit a 15-month high, up from 47,891 in June to 50,123 in July, according to the Bank of England, as cheaper homes and low interest rates lured buyers.
* But mortgage repayments outstripped new lending for the first time since the Bank started keeping records in 1993. Homeowners repaid £418 million more than was advanced as the credit crunch continued to restrict new lending.
* Overall lending to individuals contracted by £635 million as borrowers also repaid more unsecured debt. Borrowing on credit cards rose by £92 million but repayments on loans and overdrafts totalled £309 million.
* The supply of money to households and businesses remained muted despite increased funds held by banks thanks to the Bank of England's £175 billion printing money programme.
“All told, today's numbers are a reminder that the economy is nowhere near out of the woods yet,” said Colin Ellis at Daiwa Securities.
There was particular disappointment at the CIPS numbers for August after the July survey showed growth for the first time since April last year.
CIPS chief executive David Noble 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.”
Figures last week showed the UK economy shrank by 0.7% in the second quarter, not as bad as the 0.8% slump initially reported. It followed a 2.4% contraction in the first quarter and three quarters of decline last year.
It is hoped the economy started growing again in the current third quarter.
But James Knightley of ING branded today's numbers “very disappointing” and “a temporary setback”.
Reader views (10)
Well done Gordon Brown for rescuing the country from the worldwide economic recession, which has hit many other countries far harder than it has us here in the UK
- Keith Price, Luton England, 01/09/2009 16:55
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Roger from Winchester: " you must admit Brown has done a fantasitc job". HAVE YOU COMPLETELY LOST THE PLOT?? Huge wasteful fiscal expenditure; tax raid on pensilons; gold sold at rock-bottom prices; responsible for setting up the tripartite financial governing system, which failed so spectacularly; productivity decreases in public sector; creation of a welfare dependent society, which is breeding laziness, and his policy of massive increases in stamp duty; have all stifled this economy and now they are predicting a brain drain, which will further reduce tax base and receipts. typical Labour recking the British economy. The list goes on for Mcavity the cat. They do say history repeats itself That only fantastic thing I see is your comment itself - belongs in the realms of fantasy.
- Dominique Marion, london, 01/09/2009 14:52
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The green shoots are going Brown.
- Albert Hall, hove england, 01/09/2009 14:33
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If some of the contributors to this page did even some cursory research they would discover that MORE than HALF of British overseas earnings come from manufacturing and that its percentage share of UK GDP is more than that of financial services. Unfortunately, mouthing off rather than knowing anything about the subject is all too prevalent these days.
Against that the comments also show the level of disimformation that exists, mainly put out by the City and their fellow travellers. You work out the reasons why they would spread misunderstanding! Justification for their pernicious practices might be just one.
- William, London, 01/09/2009 14:25
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"I didnt think we had any manufacturing left in this third world country."
Poor deluded Richard, The UK is a G7 ciuntry and one of the wealthiest 10 nations in the workd
- Keith Price, Luton England, 01/09/2009 14:14
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those here who decry a 'lack' of manufacturing are clearly behind on their economic history. Manufacturing's share of GDP has been falling for over 50 years and is an inevitable result of global trade and development. Do they think we can build stuff more cheaply than hundreds of millions of Chinese and Indian peons? What we can do is added value engineering - e.g. Rolls Royce aero engines or Glaxo pharma. No-one in W Europe does better; dont tell me about the Germans, they are losing industrial business at an ever increasing rate.
- Peter Bench, London, 01/09/2009 13:46
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A paper currency for a paper economy. A weak currency caused by a weak government. Decades of neglecting the real economy and betting everything on financial services and estate agents are coming home to roost. The UK economy produces absolutely nothing other than debt and inflation.
- Alex, London, 01/09/2009 12:25
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You must admit that Brown has done a fantastic job.
- Roger, Winchester, England, 01/09/2009 12:14
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I didnt think we had any manufacturing left in this third world country.
- Richard Edmunds, Rayleigh Essex, 01/09/2009 12:10
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We have 'any ' manufacturing left in the UK, I thought it was all assembly of far east components !
- Jim, London, England, 01/09/2009 12:00
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