UK manufacturing sector continues to struggle

31 July 2005
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01 August 2005 | Rebecca Ellinor

The UK manufacturing industry experienced a decline in new orders, employment and stocks in July, according to the latest purchasing managers' index (PMI) report.

The overall PMI - a composite indicator of sector conditions from CIPS and NTC Research in which 50 indicates no change on the previous month - registered 49.2 in July, a slight drop from the 49.6 it registered in June, which was an improvement on May.

The report says: "After recovering slightly in June, the level of incoming new orders declined for the third time in the past four months during July."

However, while there was weaker demand from UK customers, new export orders increased for the second month in a row, with companies reporting an improvement in demand from the US, Euro-zone and East-Asia.

The report pointed to further job losses in the UK manufacturing sector, with the seasonally-adjusted employment index, one of the five constituents of the PMI, posting a reading of 46.6. This, the report says, signals the sharpest reduction in the number of staff for more than two years.

The output prices index, another component of the PMI, showed average purchase prices increased slightly for July. The report says this reflected the continued strength of world oil prices, which resulted in high transportation and energy costs. It added that there were also reports linking higher input costs to increased paper, metals and plastics prices.

Roy Ayliffe, director of professional practice at CIPS, said: "Purchasing managers saw the poor performance of the UK manufacturing sector continue into the third quarter of 2005, reflecting ongoing difficult operating conditions."

In the Euro-zone the manufacturing PMI increased from 49.9 in June to a five-month high of 50.8.

In the US, the Institute for Supply Management's (ISM) manufacturing report on business put the PMI at 56.6 an increase on June's 53.8. Norbert Ore, chair of the ISM business survey committee, said improved rate of growth in new orders and production continues to drive improvement in the sector. "It appears that the sector hit a low point in May, and has rebounded nicely in June and July," he said.

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• 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 June and previous months is available at http://www.ism.ws/ISMReport/index.cfm.

SMaug2005

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