UK manufacturing on 'go-slow' during August

Will Green is news editor of Supply Management
1 September 2015

Growth in the UK manufacturing sector remained “sluggish” during August against a backdrop of weak export demand and lacklustre output at intermediate and capital goods producers.

The Markit/CIPS UK Manufacturing Purchasing Managers’ Index slipped to 51.5 in August, down on 51.9 in July and compared to a no-change reading of 50.

August saw a modest increase in manufacturing production, as firms responded to rising levels of new business, but the expansion remained below average for the current upturn.

The consumer goods sector remained the strongest performer and the domestic market was the main pillar of new orders, while the level of new export business decreased for the fifth month in a row. Firms linked reduced overseas demand to the sterling exchange rate, weak eurozone sales and the slowdown in China.

There was a substantial drop in purchase prices during August, which declined at one of the steepest rates in the past 16 years, reflecting a combination of lower oil prices, exchange rates and falling commodity prices. Average selling prices continued to rise, though the rate of inflation was near stagnant and more than 90 per cent of respondents reported no change in their average output charges.

Meanwhile, average vendor lead times lengthened for the 27th consecutive month in August, attributed to capacity issues at suppliers and ongoing disruptions at the Channel crossing.

David Noble, group CEO, CIPS, said: “The sector was on a go-slow trajectory this month, showing a disappointingly slow pace of growth, and barely moving from last month’s figure, raising fears this could be an entrenched situation developing in the next few months.

"With turmoil in the Chinese markets and disruptions to supply chains as a result of chemical explosions in the region, the resonating effects globally may ripple through the sector in the coming months, even though China has little direct impact on the UK marketplace.”

Rob Dobson, senior economist at Markit, said: “The UK manufacturing sector remains in a holding pattern, with production growth hovering around the stagnation mark and marginal job losses reported for the first time in 26 months.”

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