Manufacturing growth slows as consumer goods stand out

Posted on 1 May 2015 by The Manufacturer

April saw a marked slowdown in the rate of expansion of the UK manufacturing sector. Output rose at the weakest pace since November last year, while the base of the upturn narrowed and became further skewed towards the consumer goods sector.

The seasonally adjusted Markit/CIPS Purchasing Manager’s Index® (PMI® ) posted 51.9 in April, a seven-month low and below the revised March reading of 54.0 (originally 54.4).

The PMI has nonetheless remained above the neutral 50.0 mark, signalling expansion, for 25 consecutive months. The slowdown in the rate of increase of output occurred in juxtaposition with weaker growth of incoming new business, in turn led by a decrease in the volume of new work received from abroad.

Commenting on the PMI data released today Ms Lee Hopley, Chief Economist at EEF, the manufacturers’ organisation, said:“Recent data points to a marked loss of momentum in manufacturing activity since the start of the year. While consumer facing sectors are still forging ahead thanks to low inflation and a pick-up in wage growth, any sign that export growth was about to turn around at the end of last year now looks to have been a false dawn.”

Companies reported that the domestic market continued to exhibit a degree of strength, leading to growth of total new orders. However, the sterling/euro exchange rate was also hitting competitiveness in our largest trading partner (the eurozone).

Growth of output and new orders was largely centred on the consumer goods sector during April, with rates of expansion in this market group remaining substantial. In contrast, the intermediate goods sector saw output and new orders fall back into contraction, while investment goods firms posted a decline in new work and slower production growth.

Manufacturing employment increased for the twenty-fourth successive month in April, with modest job creation signalled in both the consumer and investment goods sectors. Increased workloads were the primary factor encouraging firms to take on additional staff.

Mike Rigby, Head of Manufacturing at Barclays, said: “The only obvious bright light in these figures is that staffing levels across the sector continue to rise.  However, we mustn’t overlook that wage inflation is increasing competition which means that the uplift in hiring is not just to meet demand from new orders but also to backfill vacancies that already exist. Clear and easy access to labour is essential if manufacturers are to remain central to driving UK economic growth.”