PMI shows UK manufacturing slowing

Posted on 2 Jan 2015 by The Manufacturer

British manufacturing expanded at a much weaker pace than expected in December, suggesting its contribution to the economic recovery ebbed further in the final months of 2014.

The Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) fell to 52.5 from 53.3 in November, hitting a three-month low and falling short of all forecasts in a Reuters poll of economists which had predicted a rise to 53.7.

The sector ended 2014 on a softer footing, as December saw rates of expansion in production and new orders ease to the second slowest for over eighteen years. Price pressures also remained subdued, as input costs fell at a faster pace and selling prices moved only slightly higher.

While the index held above the 50 threshold for growth for a 22nd straight month, the survey added to evidence that consumers will remain the main driver of Britain’s economic recovery.

The PMI showed growth in new factory orders fell to a three-month low, while export orders stagnated.

“Despite this end of year tapering, the sector still performed well over 2014 as a whole, with growth averaging at its highest since 2010,” said Rob Dobson, senior economist at survey compiler Markit.

The average manufacturing PMI reading for the fourth quarter as a whole showed the weakest growth in a year-and-a-half – boding poorly for official manufacturing output data for the end of 2014.

Manufacturing output rose 0.3% from July through September, a long way from a 3.5 year peak of 1.1% in the first quarter, according to national accounts data published last week.

With crude oil prices having fallen almost 50 percent, input prices at British factories slid at the fastest pace since July 2012, according to the PMI, suggesting scant inflation pressure in the pipeline from British industry.

Across Europe though, it was a mixed bag: Germany, Spain and Ireland all grew, but Italy shrunk. And further afield Indonesia and China both slumped, while South Korea remained steady-just.