UK Manufacturing Sector Growth Weakens To 25-Month Low

Economy

The UK manufacturing sector growth moderated to a 25-month low in July as the downturn in production and new work continued amid heightened uncertainty, the cost of living crisis and supply chain issues.

The Chartered Institute of Procurement & Supply final manufacturing Purchasing Managers’ Index declined to a 25-month low of 52.1 in July from 52.8 in June, the survey results published by S&P Global showed Monday. The flash reading was 52.2.

Nonetheless, the PMI held above the 50.0 no-change mark due to faster jobs growth, rising stocks of purchases and longer vendor lead times.

Production declined for the first time since May 2020, reflecting downturns in the consumer and intermediate goods sub-industries. Companies linked lower output to reduced intakes of new work, weaker market demand, difficulties in sourcing components and transportation delays.

Reflecting weaker inflows from mainland Europe, the USA and China, foreign demand dropped for the sixth straight month.

At the same time, companies created more jobs in July. The rate of job creation rose to a three-month high.

Average input prices increased at the weakest pace since January 2021. Part of the rise in input prices was passed on to clients in the form of increased output charges.

Business optimism was unchanged from June’s two-year low in July. Manufacturers forecasting growth of production volumes over the coming year linked this to planned expansions and hopes for improved market conditions.

“The UK manufacturing sector shifted into reverse gear at the start of the third quarter,” Rob Dobson, director at S&P Global Market Intelligence, said.

“With the Bank of England implementing further interest rate hikes to combat inflation, the outlook is beset with downside risks,” said Dobson.

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