LONDON (Reuters) - Britain's manufacturing sector suffered a setback in its attempts to return to growth as output and employment fell more sharply in December than the previous month, according to a survey published on Tuesday.
The final reading of the S&P Global/CIPS manufacturing Purchasing Managers' Index (PMI) weakened to 46.2 in December, ending a run of three months of improvement and down from a seven-month high of 47.2 in November.
The reading was also down slightly from a preliminary December estimate of 46.4 and was below the 50.0 growth threshold for a 17th month in a row.
Britain's manufacturing sector has borne the brunt of the climb in borrowing costs. By contrast, preliminary PMIs for December showed the country's much bigger services sector saw the strongest growth in six months.
Rob Dobson, director at S&P Global Market Intelligence, said the fall in new orders for manufacturers was seen in the domestic and export markets, particularly in the European Union, and confidence in the sector was at its lowest in a year.
Cutbacks to stock levels, purchasing and employment reflected a cautious approach to costs, he said.
"With concerns about high interest rates and the cost-of-living crisis hurting demand, the outlook for manufacturers in the months ahead remains decidedly gloomy," Dobson said.
"The downturn in demand is having some positive effects on supply chains, however, with suppliers reducing their prices for raw materials and vendor lead times showing a further improvement."
Manufacturers increased their prices marginally for a second month in a row, driven by the investment goods sector. The fall in input costs was the smallest since May.