The UK manufacturing PMI drops in June
The latest Markit/CIPS Purchasing Managers’ Index (PMI) hit a three-month low of 54.3 in June. It was mainly due to new business from the export and import markets slowing down, however manufacturing production was up for the 11th consecutive month. Output and new orders rose at slower rates across the consumer, intermediate and investment goods sectors. There was a marked increase in activity from abroad with improved inflows from North America, Western Europe, East Asia and the Middle East. Continued Sterling weakness has also helped improve exporting, but the level of export growth is still not strong enough for the Uk authorities to be happy.
Manufacturing employment was up for the 11th successive month in June, though backlogs of work also dropped for the first time in three months. Manufacturers kept an optimistic outlook for June. Nearly ½ said that they would expect output to be higher in a year’s time, with just 7% expecting a drop. Manufacturers are looking to new product launches, hopeful growth of new business and planned investment spending to provide this boost. Though the uncertain political outlook coupled with the continued Brexit negotiations will continue to make this challenging.
David Johnson, director, Halo Financial, said:
“Sterling continues to occupy the complicated space between mixed UK data and the ominous concern over the Brexit negotiations. However, the UK data has certainly not been as dire as the naysayers would have us believe and there is still plenty of commerce happening. A 54.3 index reading is still comfortably into positive ‘growth’ territory. As long as that persists, Sterling will continue to tread water at the very least.”
Neil Lloyd, sales director from FCB Manby Bowdler, said:
“Whilst the PMI reported was its lowest for the last three months, it’s important to note that a) it still indicates growth and b) the 2nd quarter’s results were the best for the last three years. The growth is just slower, employment rose again and encouragingly optimism remains, with only 7% of manufacturer’s forecasting a lower output in a year’s time. That said there are though some signs that the strong first half growth may not be continued into the latter part of the year. The slowdown in growth in new orders both in the domestic and export markets is worrying, export especially given the competitiveness of Sterling. Uncertainty remains I just hope the levels of optimism remain long enough to see us through these challenging times.”
Atul Kariya, partner from MHA Macintyre Hudson, said:
“The fall in PMI index for June is probably not completely unexpected. The results for April and May were exceptionally buoyant so perhaps some pegging back was inevitable in the current economic climate. Building inflationary pressures and the increasing concerns over skills and labour shortages in the industry still remain key concerns. It remains to be seen how these will impact current levels of confidence going forward.”