Manufacturing PMI ticks higher in July

CIPS 3 August 2015

UK Manufacturing PMI at 51.9

Markit/CIPS UK Manufacturing PMI®

Key points:

  • UK Manufacturing PMI at 51.9
  • Solid domestic market offset ongoing weakness in export orders
  • Selling prices rise at fastest pace since August 2014

The start of the third quarter saw conditions in the UK manufacturing sector remain relatively subdued. Although the headline seasonally adjusted Markit/CIPS Purchasing Manager’s Index®(PMI®) edged higher to 51.9 in July, from a 26-month low of 51.4 in June, it remained below the average for the current sequence of growth that began in April 2013 (54.3).

The expansion of production remained highly dependent on the strong performance of the consumer goods sector, which offset lacklustre growth at intermediate goods producers and a contraction in the investment goods sector.

Where an increase in output was recorded, this generally reflected improved inflows of new business. However, the rate of growth in new orders slowed to a ten-month low, as solid demand from the domestic market contrasted with a further decrease in new export business.

New export orders declined for the fourth straight month in July, mainly as a result of the sterling-euro exchange rate hitting competitiveness in eurozone markets. Levels of new work from overseas were lower in the intermediate and investment goods sectors, but rose solidly at consumer goods producers.

Manufacturing employment rose for the twentyseventh successive month in July. Although the rate of jobs growth ticked higher, it remained below the average for the current sequence of rising headcounts. Where an increase in employment was reported, this reflected the ongoing upturn in new orders and efforts to clear backlogs of work.

Outstanding business declined for the seventeenth successive month in July. Along with rising employee numbers, companies indicated that slower new order growth and greater use of finished goods stocks to settle existing contracts helped reduce backlogs of work.

After rising for the first time in ten months during previous survey, July saw a decline in average input costs. Companies reported a range of raw materials as down in price, including chemicals, metals, plastics, textiles and food products. Some firms also linked the decline to the effect of the sterling exchange rate on imported raw materials.

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

“Slowly does it this month, as the sector stays in positive mode, but at a softer rate of growth than hoped for given the trend since April 2013.

“Domestic demand and consumer goods continued to drive growth as other sub-sectors carried on stagnating or falling behind. New orders from export markets stayed lifeless as the impact of the sterling exchange rate against the euro dampened any possible hot spots of new orders from the eurozone.

“Raw material shortages continued at the forefront of the sector’s list of cause for concern as the number of different types of material shortages also increased. But as stocks in the consumer sub-sector continued to rise, this indicates that the sector remained hopeful about continuing future growth.

“The capacity of suppliers remained under pressure, and a handful of respondents cited the Calais crisis as having an impact on lead times. But, this did not have a significant impact on supplies generally.

“Employment continued to rise which enabled backlogs and current contracts to make significant headway. However, the sector must be wondering how the absence of a significant numbers of new orders will affect manufacturing performance in the coming months.”


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