Growth in UK manufacturing begins to slow

1 October 2010

1 October 2010 | Lindsay Clark

The UK manufacturing sector is growing at its lowest rate since September 2009, according to the latest Markit/CIPS UK Manufacturing PMI.

The survey of purchasing managers showed that the rate of increase in new orders also remained subdued while new export orders fell slightly, as global demand weakened.

The overall index fell to 53.4 in September, down from a revised figure of 53.7 in August. However, the PMI has nonetheless now posted above the all important 50.0 no-change mark for the 14th consecutive month.

Rob Dobson, senior economist at Markit and author of the UK Manufacturing PMI, said:“September saw the weakest expansion of UK manufacturing for a year, but some reassurance can be gained from the fact that growth has merely slowed from an exceptionally strong rate in the first half of 2010, and the latest PMI remains in line with the average seen in the years of robust manufacturing growth leading up to the financial crisis. The sector has now also recouped over 30 per cent of its recession losses.”

CIPS CEO David Noble said that inflationary pressures on costs were easing despite ongoing supply chain pressures in the manufacturing sector. “Shortages of some items may still be leading to higher input prices, but sluggish new order books and a rebalancing between levels of new purchasing and stock-holding may start to alleviate some of the pressure on suppliers.”

Manufacturers will be closely monitoring sentiment in the investment and consumer goods industries in light of the forthcoming government spending review and the run-up to Christmas, because these sectors had been the main drag on growth, said Noble. “Any renewed crises may make manufacturers and their suppliers increasingly cautious about the sustainability of the recovery,” he said.

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