UK manufacturing PMI hits 17-month low

Posted on 1 Oct 2014 by The Manufacturer

UK manufacturing grew at its slowest rate in 17 months during the month of September due to reduced demand at home and abroad.

The Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) fell to 51.6, its lowest level since April last year and below the 52.5 forecast by analysts.

August’s reading was revised down to 52.2 from a previous estimate of 52.5, according to analyst firm Markit.

Growth in new orders slowed for a third straight month in September, all but grinding to a halt partly due to the strength of sterling and weak demand in Europe.

“The weakening of the manufacturing PMI data in August was cited as a major concern among the Bank of England’s Monetary Policy Committee,” said Markit senior economist Rob Dobson.

“September’s disappointing reading will therefore add to the air of caution as to whether the economy is ready for higher interest rates.”

Lee Hopley, chief economist at EEF, added: “The flat picture in European markets is inevitably proving to be a drag on export demand, with manufacturing activity across the region at a 14 month low.

“Our forecasts, nevertheless, continue to show output and employment growth in the official data through the remainder of this year.”

The survey also showed the weakest growth in output prices in 15 months, reflecting lower raw material costs and stronger competition.

Domestic factories hired at a faster rate in September after taking on staff more slowly in August, although hiring remained below the kind of pace seen at the start of the year.

David Richardson, head of manufacturing at Lloyds Bank Commercial Banking, MidMarkets, said while the slowdown was worrying, the market is likely to settle in the coming months.

“The slowdown in manufacturing is worrying, but the market is likely to settle as confidence rebounds on the back of a relatively more stable domestic political backdrop,” he said.

“Management teams must remain focused on building ties with foreign markets, particularly beyond the Eurozone, if they are to keep output levels in positive territory.”

Mike Rigby, head of manufacturing at Barclays said: “After a promising start to Q3, the growth of output and new orders continues to slow bringing a subdued outlook to the end of the quarter. Although the sector is still expanding, manufacturers are holding off raising investment levels until the economic picture, in particular the way forward on interest rates, becomes clearer. That said, it’s crucial that the sector continues to invest in new product lines, innovation and manufacturing efficiencies.”