UK manufacturing hits the doldrums

1 August 2011
Manufacturing expansion slows again

Early Eurozone services PMI shows expansion
PMI shows swift growth continues for UK manufacturers
SA PMI indicates sustained growth, but jobless recovery

UK manufacturers seek success in BRIC economies

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1 August 2011 | Angeline Albert

Operations in the UK manufacturing sector deteriorated for first time in two years in July, according to the latest Markit/CIPS Manufacturing Purchasing Managers’ Index (PMI).

Output growth slowed close to stagnation as new business dried up at its fastest rate since May 2009. The sector’s weak performance resulted in job losses for the first time since March 2010.

At 49.1 in July, down from a revised reading of 51.4 in June, the Markit/CIPS UK Manufacturing PMI revealed contraction in the market and was the weakest reading since June 2009. A reading of 50 indicates no change in activity.

CIPS CEO David Noble said: “Unless conditions improve, we may have a real problem on our hands. If there is a small chink of light in this gloomy space, then the reduction in supply chain disruption is worth noting, which has had an impact on overall business performance these last months.  Following the sprint run earlier this year, we are hoping that the manufacturing sector is merely moving into a slower but steady marathon pace, as conditions prove to be increasingly challenging and threats remain.”

Manufacturers linked slower input price increases to recent falls in the cost of plastics and steel. July data signalled that supply-chain disruption eased sharply.

Companies have reported that weaker inflows of new work freed up capacity to divert towards progressing existing contracts. Weak domestic demand contrasted with companies reporting improved sales to Australia, China, East Asia, New Zealand and the US.

Rob Dobson, senior economist at Markit and author of the PMI said: “It is not entirely unexpected given that three of the pillars supporting the surge during Q1 – inventory rebuilding, a purple patch in global growth and stable domestic demand – have somewhat crumbled. More positive news was seen on the price front. Inflation of input costs and output prices both moderated, while supply-chain pressures subsided.”

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