UK manufacturing PMI at 14-month low

Posted on 1 Sep 2014 by The Manufacturer

UK manufacturing grew at its slowest rate in 14 months during August as factory order books declined.

The latest Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) showed a growth marking of 52.5 for last month, its lowest level since June last year and below all forecasts from a revised 54.8.

Despite being above the 50-point growth level, the PMI suggested the onus will fall on consumers to keep driving Britain’s economic upturn in the second half of the year.

The fall is driven by the new orders component, which dropped to its lowest since April 2013 at 52.9, down from 56.8 in July in its biggest one-month drop in two years.

Despite factories employing people at the slowest rate since last June, Manufacturing employment in the UK increased overall.

This was credited to workforce increases at small to medium-sized manufacturers, but staffing levels at big firms reduced.

“It is becoming increasingly evident that UK industry is not immune to the impacts of rising geopolitical and global market uncertainty,” said Rob Dobson, senior economist at Markit, which compiles the PMI.

“(That’s) especially when they affect economic growth and business confidence in our largest trading partner, the euro zone.”

Mr Dobson added that the pace of expansion in British manufacturing remained slightly above its long-term average, although consumer, intermediate and investment goods producers all experienced a slowdown.

Lee Hopley, chief economist at EEF, the manufacturers’ organisation, said despite the slowing of growth, the sector remains on course for a solid year overall.

“The picture emerging from all manufacturing surveys is a softening in the pace of expansion, though the sector hasn’t moved into the slow lane, is still growing and remains on track for a solid increase in output this year overall.

“But we’ve seen a range of factors start to weigh on demand for UK goods, particularly from flagging overseas markets.

Ms Hopley added: “Trading conditions have become somewhat more challenging as we’ve moved into the second half of this year so it remains critical that policy makers continue to focus efforts on sustaining growth across manufacturing and, the economy, in the rest of this parliament.”

Chris Sumner, managing director at robotics firm Fanuc UK, told TM the data reflects to slow nature of the quiet summer months.

“The traditional summer quiet has now come to a close, and its impact has been felt across the wider manufacturing industry as growth slows,” he said.

“Despite the slowdown, our order books for the second half of the year remain healthy, with a notable increase in sales to the pharmaceutical sector as demand for robot technology and automation increases.

“This indicates UK manufacturers are investing in technology in an attempt to gain an edge over European counterparts.”

Mr Sumner said firms like his are investing in technology to gain a competitive edge.

“Technology purchases within the manufacturing sector acts as a bellwether for industry momentum, and we’re confident that our increased output levels, coupled with job creation, augurs well for the sector in the run up to Christmas.”