UK manufacturing PMI at 17-month low

Gurjit Degun
1 October 2014

UK manufacturing growth slowed again in September with weaker increases in production, new business and new export orders.

The Markit/CIPS Purchasing Managers’ Index (PMI) fell to a 17-month low last month to 51.6 from 52.2 in August, still above the 50 baseline indicating growth. The reading was only slightly above the long-run average of 51.5.

Growth of new export business was the slowest in the current 18-month succession of expansion. But job creation still accelerated during September, although the rate remained below that seen during the first half of the year.

The PMI also found average output prices rose at the slowest pace during the 15-month sequence of increase in September. This was because of lower raw material costs and higher competition restricting the ability to raise prices.

Backlogs of work declined for the seventh consecutive month as companies “maintained sufficient capacity” to meet the needs of new and existing contracts.

Rob Dobson, senior economist at Markit, said: “The weakening of the manufacturing PMI data in August was cited as a major concern among the Bank of England’s Monetary Policy Committee. September’s disappointing reading will therefore add to the air of caution as to whether the economy is ready for higher interest rates.

“With manufacturers reporting weaker selling price increases and a fall in input costs, the picture of waning inflationary pressures painted by industry may provide some leeway for the Bank of England to hold off from raising rates even if strong growth persists.”

David Noble, group CEO, CIPS, added: “With output price inflation at the lowest for 15 months and backlogs of work declining for the seventh successive month, it seems manufacturers are adopting a ‘wait and see’ approach to this slowdown. So anyone involved in supply chains and the wider economy will be watching carefully as we head towards the end of 2014.”

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