Manufacturing growth slows in August

31 August 2004
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01 September 2004 | Gareth Mytton

The growth in UK manufacturing activity slowed down in August, according to the latest purchasing managers' index (PMI) figures.

The PMI - a composite indicator of economic activity from CIPS and NTC Research, where 50 means no change on the previous month - fell to 53.1, from 56 in July.

The slowdown in output, from 58.8 in July to 53.5 in August, was caused by firms seeking to release cash by selling existing stocks, consolidation and, according to anecdotal evidence, a desire to use stocks of finished goods.

High oil prices pushed up costs for fuel, plastics and chemicals as the input prices index stood at 64.7. Only 13.4 per cent of companies managed to pass their rising input costs on to customers.

Suppliers' delivery times lengthened for the thirtieth successive month, at 42.4. Purchasers reported particular problems obtaining steel and electronic components.

They also increased their purchasing activity in an attempt to beat supply chain disruptions and rising input costs.

Companies blamed the fall in new export orders (47.6) on weaker demand, exchange rate pressures and cheaper goods from eastern Europe, although new orders rose overall (53.5)

The euro-zone PMI also slipped back in August, according to NTC Research. The PMI of 53.9 was slightly below July's 54.7. Although output rose in all countries, it slowed everywhere apart from Greece.

In the US, the Institute for Supply Management's (ISM) manufacturing report on business put the August PMI at 59, a fall on 62 in July.

"Overall the sector is still quite positive as both new orders and production remain at high levels," said Norbert Ore, chair of the ISM's manufacturing business survey committee.

* More information on the UK and euro-zone PMIs is available at www.ntc-research.com. The full text of the ISM reports on the US economy for August, and previous reports, is available at http://www.ism.ws/ISMReport/index.cfm.

SMsep2004

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