Manufacturing growth slows in UK and EU

Posted on 20 Sep 2018 and read 344 times
Manufacturing growth slows in UK and EUManufacturing is still growing in the UK and EU, as shown in the latest IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) posting 52.8 and 54.6 respectively for August (a reading above 50.0 indicates improvement, below 50.0 deterioration).

However, growth in the sector has slowed to the lowest rate for around two years, amid sliding business confidence and concerns about global economic recovery.

Employment growth in the UK manufacturing sector slowed to almost a standstill, while optimism dipped close to a two-year low.

New orders and output slowed, as did new export orders, after having increased month-on-month for the past two-and-a-half years, thanks in part to a weaker pound.

New-order growth in the EU is at the weakest rate for two years, with European manufacturers also experiencing a slowing of export tradein Germany, Spain and Italy.

Meanwhile, France experienced only slight growth in new export orders. In contrast to the UK, however, employment continued to recover, with increases in Germany and the Netherlands.

Cost pressures remain high across the UK and the wider EU, with input and output costs increasing at above average rates in the UK. Higher costs and shortages of raw materials, higher-priced electrical components and rising fuel costs have all been passed on to clients as increased pricing.

Commenting on the latest reports, David Johnson, founding director of currency specialist Halo Financial (www.halofinancial.com), said: “The on-going uncertainty surrounding Brexit has finally bitten the manufacturing sector, chipping away at the confidence of an industry that usually displays considerable optimism.

"The practicalities of economic uncertainty — from volatile exchange rates to increasing costs — are taking their toll, despite slivers of hope for improvement in the year ahead.

"Any clarity on a UK-EU deal has an immediate positive effect on the value of the pound.”

Stephen Cooper, partner and UK head of industrial manufacturing at KPMG, said: “There is a bit of ‘back to school dread’ about the latest UK Manufacturing PMI figures, which paint a very disappointing picture, given that they mark a 25-month low.

"Optimism has fallen while job creation is virtually at a standstill, with job growth in SMEs neutralised by cuts at larger businesses.

"Together with export orders also at a 25-month low — despite continued sterling weakness — these figures are particularly concerning against the backdrop of global trade wars and increasing uncertainty around Brexit.”

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