Output production halted while charge inflation increases for UK manufacturing

Posted on 2 Jun 2008 by The Manufacturer

Manufacturing output production in the UK stalled in May after almost three years of sustained growth, says the latest report from the CIPS/NTC Purchasing Managers’ Index.

A lack of new orders, which have fallen month-on-month since the start of the year, finally took its toll on output levels last month. In addition, rising costs of oil, fuel, transport, base metals and food products meant charge inflation continued its now 34 month rise. The two factors combined to mark a decrease in employment levels as companies attempted to offset losses.

“The weak domestic market proved the Achilles Hell of manufacturers (in May), while modest gains in new work from Europe and China were reported,” said Roy Ayliffe, director of professional practice at CIPS. “Furthermore, any hopes raised by increases in employment in March and April were dashed in May as jobs were cut.”

Reduced levels of new orders were reported across the consumer, intermediate and investment goods sectors. Manufacturers were powerless to act against the negative cycle, as they passed on rising costs to customers. In turn, stock reduction initiatives were implemented, meaning purchasing levels decreased. Vendor performance reached a 59 month downward trajectory.

NTC economist, Rob Dobson, said: “It is becoming increasingly likely that charge inflation will add further pressure to consumer price inflation in the coming months, making the MPC’s tightrope walk between rising cost pressures and slower economic growth even more precarious.”

The Chartered Institute of Purchasing & Supply (CIPS) work with NTC Economics to provide statistical analysis of the economy based on industrial performance. The data is compiled from the responses of 620 purchasing executives, chosen by their regional and industry contribution to gross domestic product.

For further information about the CIPS/NTC Purchasing Managers’ Index visit www.ntceconomics.com.