Growth trajectory reflects slowdown for UK manufacturers

The UK’s manufacturing sector expanded at a slower rate in June than in the previous month, with rates of new business slowing down at home and abroad.

This is the finding of the seasonally adjusted Purchasing Managers Index (PMI) from Markit/CIPs, which is down two points to 54.3 compared with May 2017.

Despite being the lowest reading in three months, the average PMI level over the second quarter (55.9) was the best registered for three years.

Positive elements from June’s PMI include manufacturers reporting further expansions of production and new order volumes despite the slowdown in new business.

Manufacturing production increased for the eleventh month in June with companies attributing the latest expansion to higher intakes of new business. However, the latest survey pointed to a broad-based slowdown, with output and new orders rising moderately across the consumer, intermediate and investment goods sectors.

The improvement in new work volumes was the weakest in the current 11-month sequence of gains. Alongside reports of a deceleration in the rate of expansion of new orders from the domestic market, manufacturers also noted that new export business rose at a weaker pace.

Where an increase in foreign demand was registered, this reflected improved business from North America, Western Europe, East Asia and the Middle East. According to Markt/CIPS, the weak sterling exchange rate continued to boost export competitiveness. Growth of new export work nonetheless eased to a five-month low.

Manufacturing employment rose for the eleventh month running in June with jobs growth registered at small, medium and large-sized enterprises, although rates of expansion slowed in all three categories. Backlogs of work also fell for the first time in three months.

The survey found also that the overall degree of positive sentiment had slipped to a seven-month low due to the uncertain political outlook at home, including concerns around Brexit negotiations.

Stephen Cooper, head of industrial manufacturing at KPMG UK said: “Uncertainty is the main theme which underpins some of the data in this month’s manufacturing PMI. European countries continues to demonstrate increasing growth and optimism, which is great to see, as they are critical trading partners.

“The UK’s figures, whilst still in growth mode with a PMI result of 54.3, reflect the uncertainty felt across Britain, related to both politics and Brexit.

“While we continue to remain in positive territory, this month’s results show a mixed picture. On the one hand, the UK results display the strongest quarter for three years, with manufacturing employment continuing to rise. On the other hand, we are seeing a slowdown in growth of new business, leading to concerns about the ability of the manufacturing industry to contribute to wider UK economic growth over the next year.”