Manufacturing growth slows to seven-month low

Will Green is news editor of Supply Management
1 May 2015

Manufacturing growth in the UK slowed to a seven-month low in April against a background of falling output and new orders in the intermediate and investment goods sectors.

The Markit/CIPS Manufacturing Purchasing Managers’ Index posted 51.9 in April, compared to a revised March reading of 54 and above the no-change position of 50.

Firms reported the domestic market continued to show strength, with growth in new orders, but the stronger pound was hitting competitiveness in the eurozone, the UK’s largest trading partner. Growth was largely centred on a substantial expansion in the consumer goods sector.

Average input prices fell for the eighth successive month, linked to the euro-sterling exchange rate, while some companies reported higher commodity prices, mainly due to the stronger dollar.

Shortages of certain raw materials led to longer delivery times from suppliers.

Output prices decreased for the fourth month in a row, while employment increased for the 24th successive month.

David Noble, group CEO, CIPS, said: “Businesses were keen to keep stock and inventory levels lower and are taking advantage of lower commodity costs to re-invest in other areas of the business such as employment, which showed another strong rise.

“Shortages in a number of raw materials added pressure to supply chains besieged by recent rises in new orders, backlogs and ongoing activity. Delivery times from suppliers increased, which may add pressure in the coming months at a time when the sector still hasn’t made as much headway as the other sectors to reach pre-recession levels of output.”

Rob Dobson, senior economist at Markit, said: “The investment and export pictures are subdued. A decline in capital goods new orders is a weak bellwether for business investment spending, while a slowing global economy and strong sterling-euro exchange rate are hurting the competitiveness of exporters.

“A key challenge for the next government is to revive manufacturing and help it at least regain its pre-crisis peak, as any signs of rebalancing the economy towards manufacturing and exports remain frustratingly elusive."

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