‘Alarm bells’ for manufacturing as new orders decline

The UK manufacturing purchasing managers’ index (PMI) indicates that the sector is contracting for the first time in two years.


The UK manufacturing purchasing managers’ index (PMI) indicates that the sector is contracting for the first time in two years.

The UK manufacturing purchasing managers’ index (PMI) indicates that the sector is contracting for the first time in two years.
 


The manufacturing PMI, published by Markit and the Chartered Institute of Purchasing and Supply (CIPS), declined to 49.1 in July this year from 51.4 in June as output growth slowed to near stagnation and new orders fell at the fastest rate since May 2009.
 

David Noble, CEO of the CIPS, says, ‘Alarm bells are ringing for the UK manufacturing sector, which has seen conditions deteriorate rapidly since the start of the year.’
 

The index reveals that while output rose in July, the rate of expansion was the least marked in the current 26-month period of growth and the number of new orders received was down.
 


According to a statement, new business dropped for the second time in the past three months and at its fastest pace for over two years.
 


Markit senior economist Rob Dobson observes that the UK’s manufacturing industry has seen a ‘marked turnaround’ since the start of the year.
 

‘It is not entirely unexpected given that three of the pillars supporting the surge during Q1 – inventory rebuilding, a purple patch in global growth and stable domestic demand – have somewhat crumbled.’
 


Although domestic market conditions were ‘lacklustre’ in July, levels of new export business increased for the tenth consecutive month as companies saw improved sales to Australia, China, East Asia, New Zealand and the US.
 


Noble comments, ‘Business from overseas buyers still remains strong, contributing to a marginal growth in output. But we need to be careful that the sector doesn’t become too reliant on this alone.’
 


The sector’s labour market was also hit in July as manufacturers lowered employment for the first time in 16 months.
 

‘Following the sprint run earlier this year, we are hoping that the manufacturing sector is merely moving into a slower but steady marathon pace as conditions prove to be increasingly challenging and threats remains,’ adds Noble.

Todd Cardy

Todd Cardy

Todd was Editor of GrowthBusiness.co.uk between 2010 and 2011 as well as being responsible for publishing our digital and printed magazines focusing on private equity and venture capital.

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