UK manufacturing index closes in on two-year low

The latest manufacturing PMI shows orders at a 21-month low as domestic and export demand slow


The PMI is down from 52 in May to 51.3 in June, its lowest level for 21 months. This also represents a further fall since the index reached a series-record high at the beginning of this year when Q1 finished at 59.8.

This latest fall is a reflection of both subdued domestic markets as well as slower, but still growing, export orders. Production posted a modest increase, according to the Markit/CIPS UK Manufacturing PMI figures, in June thanks to new product launches, being able to catch up on backlogs as well as the lack of Bank Holidays compared to earlier int he quarter.

Jobs growth also slowed, with the rate of increase reaching a nine-month low.

Sterling fell to its lowest intraday level against the euro since March 2010 this morning in response to the data. In early trading the pound reached 90.84 pence per euro before strengthening fractionally.

David Noble, chief executive officer at the Chartered Institute of Purchasing & Supply, commented: “The UK’s manufacturing sector is slipping into ‘growth-lite’ mode, a far cry from the strong expansion seen earlier in the year.

“Manufacturers remain in cautious spirits as the global slowdown has been constraining export growth. Some are reducing inventories to protect precious cash flow, raising possible questions about their ability to raise output quickly should economic conditions improve. Job creation remains positive but has slowed in reaction to a second month of declining new orders.

“Of most concern looking ahead is how far problems such as domestic austerity measures, the eurozone debt crisis and monetary tightening in markets such as China may start to soften growth even further.”



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