New data released today shows UK manufacturing grew in July at its slowest rate in a year.
The Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) fell to 55.4 from 57.2 in June – its lowest level since July 2013.
The slowdown is in line with Bank of England predictions of a UK economic slowdown being on the horizon as a result of uncertainty over the crisis in the Ukraine and a likely tightening of domestic finances.
Rob Dobson, senior economist at Markit, said: “It remains too early to gauge the impact of the Ukraine crisis, but the worry is that the combined effects of expected policy tightening, heightened economic uncertainty and sluggish trade could mean manufacturing growth could suddenly weaken more than expected.”
Export orders also hit a four-month low, and Mr Dobson said government will hope to see the service sector offset manufacturing’s export weaknesses.
Manufacturing employment grew in July but at its slowest pace since October 2013.
Lee Hopley, chief economist at EEF, the manufacturers’ organisation, said she expects the fast levels of growth seen earlier this year to level out as the year progresses.
“The bottom line from this figure is that the relatively rapid acceleration in growth seen in the first half of 2014 will ebb over the second half of the year,” she said.
“The lower reading than previously shouldn’t set off any alarm bells as the indicator is still consistent with a decent pace of growth across the sector and, continued prospects for more job creation.”
Ms Hopley added the survey pointed to companies benefiting from new product developments and efforts to sell into emerging markets, but remained cautious.
“Nevertheless the patchy industrial performance across Europe, initial signs of some cost pressures emerging and, capacity issues in the supply chain could yet weigh on the sector in the coming months,” she said.
David Richardson, head of manufacturing at Lloyds Bank Commercial Banking, Mid Markets, said despite the slowing of momentum, manufacturing’s overall performance has remained strong in 2014.
“While some of the forward momentum has slowed, the overall performance of the manufacturing sector so far this year has been positive,” he said.
“For us, it has been pleasing to see our manufacturing customers invest in state-of-the-art plant and machinery, drive efficiencies and fund cutting-edge R&D, which are all critical to the development of a high value manufacturing economy.”