UK Manufacturing PMI Falls to Three-Month Low of 54.0 in July

Aug 01, 2018

Activity in the UK manufacturing sector grew at the slowest pace in three months in July, according to a closely watched business survey released on Wednesday.

Research firm IHS Markit said its manufacturing purchasing managers’ index declined to 54.0, from a downwardly revised 54.3 in the previous month and below forecasts for a reading of 54.2.

The report indicated that the recent soft patch in UK manufacturing continued at the start of the third quarter, which could give the Bank of England some pause over its decision to raise interest rates.

The rate of expansion in both output and new orders slowed in July, as weaker growth of new work from domestic sources offset a stronger increase in new export orders.

Price pressures also remained elevated as a strong increase in average input costs led to the steepest rise in selling prices since February

Employment rose for the twenty-fourth month in a row during July, with job creation sustained across the sector.

The report also said the degree of positive sentiment among companies dipped to a 21-month low in July, amid reports of uncertainty regarding both Brexit and the exchange rate.

“UK manufacturing started the third quarter on a softer footing, with rates of expansion in output and new orders losing steam. The upturn in the sector has eased noticeably since the back-end of 2017, meaning that manufacturing has failed to provide any meaningful boost to headline GDP growth through the year-so-far," said Rob Dobson, director at survey compiler Markit.

“If the combination of weaker growth and a softening of pipeline cost pressures at manufacturers is mirrored in the larger service sector, the Bank of England’s decision will be far from unanimous and they may even yet find some cause for pause."