CIPS News


Manufacturing growth slows to 26-month low

CIPS 1 July 2015

UK Manufacturing PMI at 51.4 in June

Markit/CIPS UK Manufacturing PMI® 

 Key points:

  • UK Manufacturing PMI at 51.4 in June
  • Growth during second quarter weakest (on average) since Q1 2013
  • Broad-based job creation continues 

The UK manufacturing sector remained in a softer growth patch in June, as rates of expansion in production and new orders moderated and remained well below those prevailing in the opening quarter of the year. Over the second quarter as a whole, growth of output and new orders was (on average) the weakest since Q1 2013. 

The seasonally adjusted Markit/CIPS Purchasing Manager’s Index® (PMI®) fell to a 26-month low of 51.4 in June, down from a revised reading of 51.9 in May (previously published as 52.0). The PMI has nonetheless remained above the neutral 50.0 mark for 27 consecutive months. June saw UK manufacturing production rise at the slowest pace since April 2013. Although consumer goods output continued to expand at a solid clip, production fell in the investment goods sector and was broadly stagnant at intermediate goods producers.

Although domestic market conditions held up relatively well in June, leading to higher inflows of new business, companies reported that new export orders fell on the back of subdued demand from Europe – partly due to the sterling exchange rate. 

Manufacturing employment increased for the twenty-sixth successive month in June. Although the rate of job creation remained below the average for the current sequence of growth, it accelerated slightly from May’s near two-year low. 

The increase in staffing levels was broad-based, with capacity expanding at SMEs and large-sized producers and across the consumer, intermediate and investment goods sectors. Part of the increase in employment reflected efforts to clear backlogs of work. Outstanding business subsequently fell at the fastest pace since March 2013.

Average input costs rose for the first time in ten months during June, reflecting companies’ reports of higher prices paid for chemicals, oil, plastics and polymers. However, the rate of input cost inflation was only moderate and well below the long-run survey average. Suppliers’ delivery times meanwhile lengthened, reflecting vendor capacity shortages and raw material availability issues. After rising slightly in May, June saw average selling prices reduced for the fifth time in the past six months. Output charges were lowered at SMEs, but raised by large-sized producers. Where a reduction in selling prices was reported, this was generally linked to increased competitive pressures.

David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply commented: 

“Manufacturing delivered a sluggish but steady set of results this month compared to more upbeat activity at the start of year, but still remained on terra firma. Supported by domestic demand, purchasing managers reported gentler inflows of new orders and continuing business, as interest from export markets had lost much of its energy. 

“Suppliers continued to struggle a little more, stymied by the double pressures of capacity shortages along with access to key raw materials which were in shorter supply. Longer delivery times were registered for the 25th successive month. 

“Procurement activity also fell at the fastest rate since April 2013 as new orders saw a modest slowdown giving the opportunity to catch-up on backlogs as employment continued to rise. As increasing oil prices impacted on marginally higher input charges they failed to dampen optimism in the sector as the headline PMI index remained above its no-change mark.” 

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