UK manufacturing slows but still has 'robust' growth in July

Gurjit Degun
1 August 2014

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1 August 2014 | Gurjit Degun

UK manufacturing saw strong growth continue in July as production and new orders continued to rise at “robust” above average rates.

The seasonally adjusted Markit/CIPS UK Manufacturing Purchasing Managers’ Index recorded 55.4 in July, down from 57.2 in June. It is the lowest reading this year but above the 50 baseline, indicating growth, and well above the survey average of 51.1. It signalled improvement for the seventeenth consecutive month.

The lower reading comes as a result of slower rates of growth in new orders and new export business. The survey put the “sustained growth” in output volumes down to a “marked uptick” in levels of incoming new orders during July.

Survey respondents said increased inflows were linked to the launch of new product lines, price promotions, stronger economic sentiment and rising demand from both domestic and overseas clients.

Job creation was recorded for 15 months running, although the rate of increase in staffing levels dropped to a nine-month low. Increased purchase prices were linked to higher costs for metals, plastics and timber.

Rob Dobson, senior economist at Markit, said: “The Bank of England will not be overly worried by the weaker numbers. Policymakers were expecting growth to slow slightly from the impressive rate seen in the first half of the year, in part due to expectations of higher borrowing costs next year.

“The concern is that the slowdown we are seeing is also a symptom of increased economic uncertainty both at home and in key export markets of Europe, in turn fuelled by worries about the Ukraine crisis. If the situation with Russia deteriorates further, we should expect goods exports to come under further pressure.”

David Noble, group CEO, CIPS, added: “Suppliers have arrived at an important crossroads as they consider how to adapt to the lowest growth in purchasing activity for 14 months. With supplier delivery times growing faster than at any time in the past three years, any further obstruction to supply chains could constrain growth even further in Q4.”

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