Weakest rating since 2009 for Markit/CIPS Manufacturing PMI

At 49.1 in July, down from a revised reading of 51.4 in June, the seasonally adjusted Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) posted its weakest reading since June 2009.

Output is said to have risen marginally in July, with the rate of expansion the least marked in the current 26-month period of growth. Underlying the slowdown was a reduction in the level of new orders received.

According to Markit/CIPS UK Manufacturing PMI, new business declined for the second time in the past three months and at the fastest pace for more than two years. This mainly reflected lacklustre domestic market conditions, as levels of new export business rose for the 10th straight month. Companies reported improved sales to Australia, China, East Asia, New Zealand and the US.

Manufacturing employment declined slightly in July, representing a marked turnaround from the record jobs growth seen five months earlier.

Backlogs of work continued to fall, despite the reduction in staffing levels. Companies reported that weaker inflows of new work freed up capacity to divert towards progressing existing contracts.

Price pressures eased further in July as inflation of input costs and output charges eased to the weakest rates since December 2009 and last November respectively.

Manufacturers are said to have linked slower input price increases to recent falls in the cost of plastics and steel. The rate of inflation remained above the long-run average, amid reports of higher prices for metals, packaging, paper products and power. Part of the increase in costs was passed on to clients in the form of higher selling prices. Output charges rose for the 21st successive month and across all of the sectors covered by the survey.

‘Alarm bells are ringing for the UK manufacturing sector, which has seen conditions deteriorate rapidly since the start of the year,’ said David Noble, chief executive officer at the Chartered Institute of Purchasing and Supply.

Philippa Oldham, head of manufacturing at the Institution of Mechanical Engineers, said: ‘Just 12 months ago manufacturing was the only sector showing strong, consistent growth, putting it at the forefront of the UK’s economic recovery. These latest figures show that British manufacturing is now heading towards recession,’ she added.

‘Britain remains an engineering powerhouse, but it is suffering from crumbling infrastructure, a growing skills shortage and 30 years of neglect by successive governments.

‘The coalition has been making all the right noises about rebalancing the economy, but these figures show the urgency with which they need to follow this up with firm, concrete action. This means boosting skills through high-level — not just low-skilled — apprenticeships, significantly increasing investment in our infrastructure and making the most out of our world-class knowledge economy by easing IP rights registration.’