Output holds firm as manufacturing growth loses pace

30 September 2004
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01 October 2004 | Gareth Mytton

September's growth in the UK manufacturing economy was the slowest for more than a year, according to this month's purchasing managers' index (PMI).

The PMI - a composite indicator of economic activity from CIPS and NTC Research, where 50 means no change on the previous month - fell to 52.2, its lowest reading since June 2003, from a revised level of 52.8 in August.

However, the latest fall was marginal, suggesting a largely unchanged level of growth on the month before. Output, at 53.2, was only 0.1 lower.

The muted PMI, compared with previous figures in the unbroken 15-month period of growth, also reflected a subdued rise in new orders (51.8, down from 53.1).

Input price inflation accelerated, at 67.7. Purchasers blamed rising metal and oil prices, longer lead times and supply shortages. More than four out of five companies were unable to pass the increased charges on to customers.

The suppliers' delivery times index, at 42.7, indicating longer average lead times for the thirty-fifth successive month. Anecdotal evidence suggested this was caused by strong global demand, especially for steel.

The quantity of purchases index eased to 52.6, owing to inflationary pressures and the weaker growth in new orders.

However, stocks of purchases fell at 47.6, under the twin pressures of delays to supplies and deliberate attempts to run down stocks that, in some cases, reflected efforts to protect margins against rising costs.

The euro-zone manufacturing PMI hit a seven-month low in September, according to NTC Research. The index dropped to 53.1, although output rose in all countries in the survey.

France and Austria saw growth accelerate, but it slowed everywhere else.

In the US, the Institute for Supply Management's (ISM) manufacturing report on business put the PMI at 58.5, a 0.5 fall on August's figure. New orders also lost pace, although production accelerated.

• Coverage of previous months' manufacturing, construction and services PMI reports is available at http://www.supplymanagement.com/pmi.

• 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 manufacturing economy for September and previous months is available at http://www.ism.ws/ISMReport/index.cfm.

SMoct2004

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