Election and Brexit hit manufacturing growth

Will Green is news editor of Supply Management
3 July 2017

Growth in UK manufacturing slowed to a three-month low against the backdrop of the general election and the start of Brexit talks, according to the latest PMI.

Output and new orders rose mildly across the consumer, intermediate and investment goods sectors, pointing to a broad-based slowdown affecting domestic and export markets.

The Markit/CIPS UK Manufacturing Purchasing Managers’ Index slumped to 54.3 in June, down on 56.3 in May and against the neutral reading of 50.

Where an increase in foreign demand was registered this reflected improved inflows from North America, Western Europe, East Asia and the Middle East. The weak pound continued to boost exports, though export growth was the slowest for five months.

Rates of increase in input costs and output charges slowed further from highs seen at the start of the year, though supply chain pressures remained with average vendor performance deteriorating.

Manufacturers remained optimistic, with almost 48% forecasting higher output in a year’s time, compared to 7% predicting a decline. Confidence was linked to planned investment spending, new product launches and expected growth of new business. However, positive sentiment slipped to a seven-month low amid reports of political uncertainty.

Duncan Brock, director of customer relationships at CIPS, said: “Manufacturing activity showed signs of slowing this month as fears that the sector would feel the impact of both the election and the start of Brexit talks materialised.

“Though the burden of higher cost pressures eased, purchasing activity was held back by the halting performance of supply chains as a shortage of some essential raw materials was reported. Combined with disappointing vendor performance there will be some frustration over the progress of work in hand and being fit for the future post-Brexit world.”

Rob Dobson, senior economist at IHS Markit, said: “While the survey data add to signs that the economy is likely to have shown stronger growth in the second quarter, further doubts are raised as to whether this performance can be sustained into the second half of the year.”

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