UK Manufacturing PMI at 14-month low

CIPS 1 September 2014

Manufacturing employment rises again





Markit/CIPS UK Manufacturing PMI®:

- Manufacturing PMI posts 52.5 in August

- Growth of output and new orders slow further

The upturn in the UK manufacturing slowed further in August. The seasonally adjusted Markit/CIPS Purchasing Manager’s Index® (PMI®) posted 52.5, down from 54.8 in July, to record its lowest reading since June last year.

Manufacturing output and new orders expanded again in August, taking the respective sequences of growth to one-and-a-half years in both cases.
Companies linked higher production to growth of new orders from domestic and overseas markets.

The upturn also remained broad-based, with production and new business inflows continuing to rise across the consumer, intermediate and investment goods industries. Although the sector is nonetheless still achieving a reasonably solid pace of expansion, signs of a slowdown have become increasingly evident in recent months.

Survey indices for output and new orders are now around seven points lower than at the beginning of the second quarter. The easing in the growth rate of output in August was also as broad as the expansion, with rates of increase slowing across
the three product categories covered.
 Foreign demand for UK manufactured goods increased for the seventeenth month in a row in August. Order inflows improved from clients in the USA, Canada, Asia and the Middle East. However, the rate of increase in new export orders was the
lowest since March.

August also saw further job creation at UK manufacturers, with employment rising for the sixteenth straight month. The rate of growth in payroll numbers nonetheless slowed in line with the trends in output and new orders, hitting a 14-month low. Staffing levels were raised at SMEs, but trimmed moderately at large-scale producers.

The level of work-in-hand (but not yet completed) at UK manufacturers decreased for the sixth month running in August. Companies linked lower backlogs of work to higher production, increased employment and to settling contracts from existing

The level of stocks of finished goods subsequently dropped at the fastest pace since November 2013, taking the forward-looking new orders to inventory ratio to its joint-lowest in 16 months.

Purchase price inflation ticked higher in August, reaching a seven-month peak, but remained low by the historical standards of the survey. Average selling prices also posted a modest increase, albeit the least marked for three months.


David Noble, Group Chief Executive Officer at the Chartered Institute of Purchasing & Supply: “UK manufacturers were walking rather than running in August as the sector’s performance fell to a 14-month low and growth began to slow further. There is a distinct easing across the breadth of UK manufacturing, with growth in output, new orders and employment all reducing to a more
pedestrian level.

“Growth in new export orders has slowed to a five-month low against a backdrop of market uncertainty and increasing geo-political tensions. To help plug the hole left by a faltering Eurozone, manufacturers are finding new markets in North America and the Middle East. Vitally however, manufacturers continue to anticipate growth for the foreseeable future, with SMEs in particular, still hiring to catch up with one and a half years of consecutive output and new order growth.

“There are signs of improved efficiency as backlogs of work shorten and stocks of finished goods are depleted, but the new status quo is likely to see the manufacturing sector stabilise at a smaller proportion of GDP than before the recession. The 15th consecutive month of growing supplier delivery times suggest that supply chains have not fully adjusted to the recovery and this may pose a long- term obstacle to manufacturers.”

The September 2014 Report on Manufacturing will be published on:
Wednesday 1st October 2014 at 09:30


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