UK manufacturing decline slows in June

Car Manufacturing

The slowdown in UK manufacturing eased slightly in June, but the sector remained in recession, new figures showed today.

The Purchasing Managers’ Index (PMI), compiled by the Chartered Institute of Purchasing & Supply (CIPS) and financial information services firm Markit, was recorded as 48.6 in June. Although this is an improvement from May’s three-year low of 45.9, anything below 50.0 indicates a contraction in activity.

Over the whole of the second quarter the average PMI reading was 48.2 – the weakest since the same period in 2009.

Manufacturing output expanded in June following a drop in May, but the underlying outlook was said to be subdued as companies reported that output volumes had been underpinned by a marked reduction in backlogs of work.

In addition there was a decrease in new orders over the month and new export orders declined for the third consecutive month, weighed down by the eurozone debt crisis as well as slower economic growth in the US and Asia.

There was some good news for manufacturers as price pressures eased in June, with the price paid by manufacturers for their raw materials falling at the fastest pace for more than three years. Meanwhile the prices charged by manufacturers continued to rise, as companies moved to protect their margins and catch up with the high input cost increases seen earlier in the year.

Rob Dobson, senior economist at Markit and author of the Markit/CIPS Manufacturing PMI, noted that there is a lot of volatility in manufacturing at the moment, with factors such as the Diamond Jubilee holidays making it hard to see what the underlying trend is.

However, it’s clear that the second quarter as a whole is looking weaker than the first quarter, suggesting that manufacturing output may have contracted by at least 0.5%, acting as a drag on the economy for the fourth successive quarter, Dobson added.

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