The UK manufacturing sector experienced a slowdown in growth during June, with notable challenges impacting the industry’s performance.
- Factories increased their activity for the second consecutive month, albeit at a slower pace than May.
- The S&P Global/CIPS UK purchasing managers’ index (PMI) for June stood at 50.9, a slight decrease from May’s 51.2.
- Domestic orders continued to rise, showcasing robust demand within the UK market.
- Conversely, export orders fell for the 29th straight month, affected by shipping delays and rising costs.
For the second consecutive month, UK factories increased their activity, although at a slower pace compared to May. The S&P Global/CIPS UK purchasing managers’ index (PMI) for June registered at 50.9, down from May’s 22-month high of 51.2. Despite this slight decline, a reading above 50 still indicates expansion within the sector.
The PMI survey highlighted increased production volumes driven by a rise in new domestic orders and ongoing efforts to clear backlogs. Rob Dobson, director at S&P Global Market Intelligence, noted that the UK manufacturing sector is experiencing its strongest growth in over two years, with robust domestic demand contributing significantly to this positive trend.
However, new export orders fell for the 29th consecutive month. Declines were particularly noted in key markets such as the United States, China, and mainland Europe. Shipping delays and rising freight costs, partly due to attacks on container vessels in the Red Sea by Houthi rebels, have been significant factors in this decline.
Companies also reported substantial increases in input costs, with rises in prices for energy, food, metals, packaging, paper, plastics, and timber. These cost pressures have led to the highest input price inflation since January 2023, according to Peter Arnold, chief economist at EY UK.
Peter Arnold remarked that while shipping disruptions have raised inflation concerns, core goods inflation has remained lower than expected. This stability in core goods inflation may provide the Bank of England with an opportunity to consider interest rate cuts in the near future.
Rob Wood, chief UK economist at Pantheon Macroeconomics, commented on the sector’s resilience, stating that despite downward revisions to output, the figures indicate a solid recovery for the UK manufacturing sector.
In summary, the UK manufacturing sector faces significant challenges from shipping delays and rising costs, but strong domestic demand and stabilising core goods inflation offer some optimism for the future.
