The upturn in the UK manufacturing slowed further in August. The UK manufacturing Purchasing Managers Index (PMI) came at 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 inventories.
Rob Dobson, senior economist at survey compilers Markit said, "Growth of the UK manufacturing sector cooled further in August, taking the headline PMI down to a 14-month low of 52.5. The underlying dynamics of the survey also provided a consistent picture of a broad slowdown, with inflows of new business and new export orders weakening and the pace of job creation also easing. Sustaining the upturn is nonetheless still a positive in itself, and it should be noted that the pace of expansion remains solid and a touch above its long-run average.
"However, it is also becoming increasingly evident that UK industry is not immune to the impacts of rising geopolitical and global market uncertainty, especially when they affect economic growth and business confidence in our largest trading partner the eurozone. It is noticeable that where export orders were reported to have risen, companies mainly linked this to demand from North America, Asia and the Middle East, as opposed to our European partners."
"It therefore looks as if manufacturing will provide a lesser contribution to the UK economic growth story in the third quarter than at the start of the year. With the market's focus firmly on the Bank of England for any signal on the timing of the expected move in interest rates, the MPC will likewise keep a watchful eye on the other sectors of the economy for signs they can offset the slowdown in manufacturing."
