Manufacturing growth ‘increasingly lacklustre’

3 September 2018

UK manufacturing growth hit a two-year low in August, according to the latest PMI.

The IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) dropped to a 25-month low of 52.8 in August, down from a revised reading of 53.8 in July, originally reported as 54. 

Despite the weakness of the pound sterling, foreign demand decreased for the first time since April 2016.

IHS Markit director Rob Dobson called the August performance “increasingly lacklustre”. 

“The latest PMI report is broadly consistent with zero growth in manufacturing production, meaning the sector will likely fail to provide any support to the wider UK economy in the third quarter,” he said.

“Inflows of new work from both domestic and overseas sources will need to strengthen if manufacturing is to show renewed vigour in the coming months,” he added.

The ongoing slowdown in manufacturing also had a knock-on impact on the labour market, with the pace of job creation slumping to near-stagnation. Meanwhile, business optimism dipped to a 22-month low, with only 47% of those surveyed registering expectations of higher production in a year’s time.

Raw material shortages and supply chain constraints also contributed to an increase in purchasing costs, according to the report. Average vendor delivery times lengthened markedly in August, albeit to the lowest extent in four months. Some companies said transport delays had also increased supplier delivery times, it said.

Duncan Brock, group director at CIPS, said: “The weaker trends in both output and new orders impacted on job creation as larger corporates scaled back from hiring new staff and business optimism weakened.

“Purchasing prices continued their steep climb, affected by material shortages and worsening supplier performance making life more difficult.

“With a subdued global economy threatened by escalating trade wars and Brexit uncertainty making its mark, it’s unclear where future opportunities to sustain the health of the sector will come from.”

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