United Kingdom: Manufacturing PMI loses steam in June
July 3, 2017
The manufacturing IHS Markit/CIPS Purchasing Managers’ Index (PMI) fell from a revised 56.3 in May (previously reported: 56.7) to 54.3 in June, marking the lowest reading in three months. However, the index remains comfortably above the 50-point threshold that separates expansion from contraction in the manufacturing sector, where it has been for 11 consecutive months.
June’s drop reflects smaller expansions in output and new orders, as growth of new business slowed both at home and abroad. Although a more sluggish domestic market is understandable, given the recent overall slowdown in economic activity in the British economy, figures from overseas markets are more disappointing given the weakness of sterling; growth of new export work fell to a five-month low. Manufacturing firms took on more workers in June, albeit at slower rate than in the previous month due to a reduced pressure on operating capacity, while backlogs of work declined.
According to Rob Dobson, Senior Economist at IHS Markit, “The UK manufacturing sector largely weathered the uncertainty of a general election and (the) start of formal Brexit negotiations to eke out further output growth at the end of the second quarter. However, the rate of expansion eased again in June, with growth weakening across the consumer, intermediate and investment goods industries.”
Author: Oliver Reynolds, Economist