Manufacturing expansion slows again

1 July 2011

1 July 2011 | Angeline Albert

The capacity of UK manufacturing to meet rising demand improved in June, but could not stop the sector’s growth falling to its lowest level since September 2009.

According to the Markit/CIPS UK Manufacturing PMI it reached 51.3 in June. However, this was a slower rate of growth compared to the 52 recorded in May, as new orders fell for the second successive month.

A weak domestic market and a smaller rise in exports, due to a slowdown in global economic growth, affected the sector’s order book levels.

Input prices also eased last month, and manufacturing production experienced a modest rise. Companies attributed this to new product launches, catching up on backlogs of work and fewer bank holidays than in May.

Job growth in the sector also slowed, with the rate of increase at a nine-month low. Companies reported leavers were not being replaced and temporary staff were being released.

Rob Dobson, senior economist at Markit and author of the PMI said it was “disappointing to see that the easing in supply chain delays has yet to feed through to a much-hoped-for revival in manufacturing growth.

“With strong headwinds already in place and austerity measures likely to put increasingly counteractive pressure on domestic and consumer demand, it looks as if manufacturing has entered a slower growth phase which could be with us for some time,” he said.

David Noble, CEO at CIPS, added: “Manufacturers remain in cautious spirits as the global slowdown has been constraining export growth. Some are reducing inventories to protect precious cash flow, raising possible questions about their ability to raise output quickly should economic conditions improve.”

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