UK Manufacturing Growth Tumbles to Two-Year Low in August

Growth in UK manufacturing sector fell to more than two-year low in August 2018, according to IHS Markit/CIPS UK Manufacturing Purchasing Managers Index released on Monday (03).

“August saw further signs of slowdown in the UK manufacturing sector. Rates of expansion in output and new orders eased following the first contraction in new export business for over two years. The subdued performance of the sector also transmitted itself to the labour market, with the pace of manufacturing job creation slumping to near-stagnation,” the PMI report said.

The seasonally adjusted IHS Markit/CIPS PMI was at 52.8 in August, down from a revised reading of 53.8 recorded in July (originally reported as 54.0). The PMI has posted above the neutral 50.0 mark for 25 successive months, although the latest reading is the lowest registered during that sequence, the report said.

Manufacturing production rose at the slowest pace in 17 months in August, as the growth of new order inflows eased to its weakest during its current 25-month sequence of expansion.

Foreign demand decreased for the first time since April 2016, despite the continued relative weakness of the sterling exchange rate. Some firms linked lower inflows of new work from abroad to the recent weaker pace of expansion of the world economy.

The ongoing slowdown of manufacturing output and new orders had an impact on both the labour market and business confidence in August. The pace of job creation eased to near-stagnation, as cuts at large enterprises offset further increases at SMEs.

Although companies maintained a positive outlook, with 47 per cent expecting higher production in one Year’s time, optimism dipped to a 22-month low in August.

“Looking ahead, manufacturers’ optimism about the outlook for the year ahead has been receding in recent months and is now at a 22-month low. While a hoped-for improvement in new export order growth and new product launches are forecast to stimulate future expansion, manufacturers are also expressing rising concerns about the uncertain backdrop of Brexit,” said Rob Dobson, Director at IHS Markit commenting on the PMI data.

Meanwhile, the pound was seen trading down on Tuesday (28) amid US-China trade war tensions, uncertainty over Brexit, scheduled next year.