Manufacturing output rises on solid domestic demand

CIPS 1 June 2015

UK Manufacturing PMI at 52.0 in May

Markit/CIPS UK Manufacturing PMI®

Key points:

  • UK Manufacturing PMI at 52.0 in May 
  • Consumer goods sector remains main growth pillar 
  • Job creation slows further

The UK manufacturing sector saw further modestexpansions of both output and new orders in May, as a solid domestic market continued to offset lacklustre demand from overseas. The consumer goods sector remained the stand-out performer, while investment goods producers fared better than in April. Negative news came from the intermediate goods sector, where the downturn in output continued.

The seasonally adjusted Markit/CIPS Purchasing Manager’s Index® (PMI®) – a summary indicator of overall manufacturing sector health – ticked higher to 52.0 in May, up from a revised reading of 51.8 in April (previously reported as 51.9). The PMI has remained above the neutral 50.0 mark for 26 months.

UK manufacturing production rose again in May, extending the current sequence of expansion to 27 months. Although the rate of output growth edged lower, the extent of the easing was only minor and much less severe than April’s steep slowdown.

May also saw a further increase in incoming new business, with the rate of growth in new orders picking up slightly from April’s seven-month low. Companies attributed improved inflows of new work to solid domestic demand, rising client confidence and recent new product launches.

The trend in new business from overseas remained lacklustre compared to conditions in the domestic market. This was highlighted by the level of new export business holding stable in May following a modest decrease during the prior month. The exchange rate and soft global market conditions were again cited by companies as factors contributing to the decrease in new work from abroad.

Manufacturing employment rose for the twenty-fifth consecutive month in May. However, the rate of jobs growth was only marginal and the weakest during the current sequence of rising staffing levels. Modest increases in capacity at consumer and investment goods producers were partly offset by job cuts in the intermediate goods sector.

Average selling prices rose for the first time in five months during May, mainly due to solid increases at both consumer and investment goods producers. Factory gate prices were broadly unchanged in the intermediate goods sector.

Although May saw a further decrease in average input costs, the rate of price deflation slowed sharply over the month. Companies continued to report lower costs for a range of raw materials, but also noted that this had been partly offset by recent oil prices rises.

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

“Though hopes of a stronger pace of recovery were dashed by manufacturing this month, the sector resisted repeating April’s sharp slowdown and instead delivered a further modest easing in the growth rate of activity. Though the index remained just above the no-change mark, there was an element of imbalance as the persistent dawdler continued to be the intermediate goods sub-sector, while the consumer sub-sector surged ahead.

“Suppliers remained under-performing, as delivery times lengthened and shortages of a few key raw materials added pressure to the supply chain. Any caution around future business opportunities also translated into lower inventory levels as business optimism was low key and employment levels remained static.

“Overall, the sector’s enduring driver continued to be domestic demand, as exports failed to ignite any new highs in recovery. This uninspiring level of activity is likely to cast a shadow in the coming months and encourage expectations of a flatlining future.”

The June 2015 Report on Manufacturing will be published on:

Wednesday 1st July 2015 at 09:30


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