PMI slows to 10-month low

Posted on 1 Oct 2010 by The Manufacturer

The manufacturing industry’s recovery slowed in September, according to the CIPS/Markit Purchasing Managing Index, which fell to 53.4 from 54.3 in August.

Although anything above 50 constitutes growth, September’s PMI intonates the slowest rate of expansion for 10 months.

The figure takes into account new orders, output, employment, supplier performance and stocks of purchases.
Production rose, but at a more subdued rate than has been the habit over the last sixteen months of growth. The level of new export orders declined for the first time since July 2009. Overall employment increased in September, but only slightly. Cost inflation was hgh in September with manufacturers largely passing ion their increased costs and the incidence of supply chain delays remaining high by historical standards.

The report’s authors said that although the PMI gives rise to some concerns there are still positive to be drawn too.
Rob Dobson, senior economist at Markit, said: “September saw the weakest expansion of UK manufacturing for a year, but some reassurance can be gained from the fact that growth has merely slowed from an exceptionally strong rate in the first half of 2010, and the latest PMI remains in line with the average seen in the years of robust manufacturing growth leading up to the financial crisis. The sector has now also recouped over 30% of its recession losses.

“However, more worrying is the order book trend, with total orders rising only slightly following the marked downshift in August, and new export orders falling for the first time since July 2009. This suggests that the slowdown in production has further to run.”

“Looking ahead, confidence is key,” added David Noble, CEO of the Chartered Institute of Personnel and Development. “The investment and consumer goods sectors were the main drags on manufacturing growth in September, and producers will be closely monitoring sentiment in these areas in light of the forthcoming government spending review and the run-up to Christmas. Any renewed crises may make manufacturers and their suppliers increasingly cautious about the sustainability of the recovery.”