UK manufacturing growth 'remains sluggish'

Will Green is news editor of Supply Management
1 October 2015

Growth in the UK manufacturing sector slipped to a three-month low in September while input prices fell at their fastest pace in more than 16 years, according to a survey of buyers.

The Markit/CIPS UK Manufacturing Purchasing Managers’ Index dropped to 51.5 in September, down from August’s revised figure of 51.6 and against the no-change position of 50.

Companies reported cost pressures shifted downwards in September with lower prices paid for commodities, particularly oil and oil-related items. Firms also said exchange rates and competition among suppliers were driving down prices.

Average selling prices fell for the first time in three months, reflecting competitive pressures and some pass-through of lower input costs to clients. But the rate of output charge decrease was only modest, with around 8 per cent of companies reporting a reduction.

September saw generally subdued trends in both output and new orders, while consumer goods producers saw a substantial output growth slowdown and a contraction in new orders for the first time in almost three-and-a-half years.

In contrast, intermediate goods producers saw a solid increase in output and investment goods production returned to growth.

David Noble, group CEO, CIPS, said: “Input costs continued to fall at their fastest pace in over 16 years, supporting business margins as commodity prices dropped. A minority of companies also reduced their output prices to counteract pricing reductions from their competitors.

“An element of caution has crept into business sentiment for the future which remains relatively positive in an uninspiring landscape.”

Rob Dobson, senior economist at Markit, said: “The UK manufacturing sector remained sluggish at the end of the third quarter, stunned by a triple combination of a sharp slowdown in consumer spending, weak business investment and stagnating export order inflows. The survey is still broadly consistent with stagnation, or even a mild downturn, when compared to official data.”

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