Manufacturing stalls with growth at 21-month low

Posted on 1 Jul 2011 by The Manufacturer

The Purchasing Managers’ Index for June has scored 51.3, a drop of 0.7 from the same time in May, stoking fears that industrial growth is stalling.

It is the lowest figure that the index (PMI) of output and business confidence has recorded in 21 months.

A PMI above 50 indicates growth, anything below indicates negative growth.

While the figures are not a cause for optimism, Lee Hopley, chief economist at EEF, made the case for a more positive view of manufacturing output.

“Despite the pace of expansion in activity easing for the fifth month running this shouldn’t be overplayed,” she said. “Behind the headline the figure the detail shows production, export orders and employment all still edging up, albeit at a more subdued pace than earlier in the year.”

The government austerity programme is a cause for concern, she added: “[The spending cuts] leave UK manufacturers exposed to events in the global economy where persistent weakening of activity indicators across Europe and Asia would start to raise alarm bells about the UK’s prospects.”

Mark Lee, head of manufacturing at Barclays Corporate, said: “After an increasingly challenging first half of the year, today’s PMI statistics are an indication of the pressure UK manufacturing is under with major input price rises and the economic woes facing many key trading partners.”

Even though signs of inflationary pressure have now eased in the UK, Markit said that growth was “stalling”, with weak domestic demand and the recent boost to exports now fading. “The manufacturing sector continued to slip closer to stagnation in June,” said Rob Dobson, senior economist at Markit.

George Archer