MNI: UK July Manufacturing Output Hits 3-Month Low: IHS Markit

--UK June Manufacturing PMI 54.0 Vs Revised 54.3 in June

     LONDON (MNI) - UK manufacturing sector activity was lower in July, the

latest IHS Markit/CIPS Purchasing Managers' Index (PMI) showed.

     The headline manufacturing PMI slipped 0.3 points to 54.0 in July from

June's downwardly revised 54.3 (54.4 prev). This meant June was in line with

May's read, which was also revised by the same amount. 

     After May's bounce from April's 17-month low and June steady as she goes

reading, July's modest move lower illustrates continued softness in

manufacturing growth since the turn of the year, with intermediate goods

production falling for the first time in two years. 

     According to IHS Markit, July saw the weakest expansion in UK manufacturing

output in 16 months, with both output and new orders exhibiting slower rates of

expansion. Putting this together meant domestic sources were the main reason for

the slowdown of new business growth which undermined new export work increasing

at the fastest pace for six months. 

     --EXPORT STRENGTH

     The strength of new export work was reported by companies to be stemming

from improved demand from mainland Europe, the USA, China and the Middle-East.

The momentum was cited by some firms as being accommodated by promotional

activity and new product launches. 

     Sectoral data shows that intermediate goods production dampened an

otherwise relatively neutral picture. Investment goods producers and the

consumer goods industry saw solid growth in both output and new work (albeit

lower than June). Intermediate goods however contracted for the first time in

two years, with the rate of expansion in new business slowing sharply to

near-stagnation. 

     However, hiring intentions appeared to show some positive signals.

Employment rose for the 24th month in a row, with job creation sustained across

all sectors. Manufacturers linked staffing levels to planned company expansions,

higher output and efforts to reduce backlogs of work.

     --INPUTS COSTS ELEVATED

     Input cost inflation remained high in July, after accelerating to a

four-month high in June. The pressure stemmed from rising commodity prices and

shortages of certain raw materials driving up costs. The cost pressures were

such that firms passed part of the increase on to clients resulting in the

steepest rise in selling prices since February. 

     "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," Rob Dobson, Director at IHS Markit, said.

     Duncan Brock, Group Director at the Chartered Institute of Procurement and

Supply added: "The general manufacturing malaise was compounded by a scarcity of

essential raw materials and vendor delivery times lengthened at a pace not seen

for ten months... Should operating conditions remain unchanged, this damp squib

of a performance may persist and the UK has to look to other sectors to inject

some vitality into its economic performance."

--MNI London Bureau; +44 203 865 3828; email: jai.lakhani@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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