'Flatline feel' to UK manufacturing

Will Green is news editor of Supply Management
1 August 2018

Growth in the UK manufacturing sector hit a three-month low in July, according to the latest PMI.

The IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index dropped to 54 in July, down on 54.3 in June and against the no-change reading of 50.

A slowdown in the domestic market led to slower rates of expansion in both output and new orders, while new export work increased at the fastest pace for six months.

Companies reported improved demand from mainland Europe, the US, China and the Middle East with some noting promotional activity and new product launches supporting sales in overseas markets.

Strongest growth was seen at investment goods producers during July, while consumer goods fared relatively well but intermediate goods production contracted for the first time in two years.

Input cost inflation remained elevated, as rising commodity prices and shortages of certain raw materials drove up costs. Part of these costs was passed onto clients, leading to the steepest rise in selling prices since February.

Duncan Brock, group director at CIPS, said: “There was a flatline feel to manufacturing this month, as the sector held its ground, but only just. Overall production slowed, whilst new order growth took a leisurely pace, and it was the unbalanced reliance on export orders that kept the sector afloat with domestic clients keeping their distance.

“This general manufacturing malaise was compounded by a scarcity of essential raw materials and vendor delivery times lengthened at a pace not seen for ten months as supply chains stuttered and stumbled to meet contractual obligations.

“On the price front, firms raised client prices again in a bid to prevent another sudden increase in their own costs from gnawing away at hard-won profits. But this strategy may not offer long-term solutions as uncertainty remains enemy number one.”

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