UK Manufacturing Activity Growth Weakest In 25 Months

UK Manufacturing Activity Growth Weakest In 25 Months

The UK manufacturing sector expanded at the weakest pace in more than two years in August as foreign orders contracted for the first time since early 2016.

The IHS Markit/Chartered Institute of Procurement & Supply Purchasing Managers' Index rose to 52.8 in August from a revised 53.8 in July, data showed Monday. The expected reading was 53.9.

The PMI has posted above the neutral 50.0 mark for 25 successive months, although the latest reading was the lowest registered during that sequence.

Based on its historical relationship with official ONS data, the latest PMI report is broadly consistent with zero growth in manufacturing production, meaning the sector will likely fail to provide any support to the wider UK economy in the third quarter, Rob Dobson, director at IHS Markit, said.

Despite the gloomy outlook presented in the latest survey, manufacturing should prove less of a drag to growth in the third quarter than it was in the second quarter, Andrew Wishart, an economist at Capital Economics, said.

Production expanded at the slowest pace in 17 months on weak new orders in August. Despite currency weakness, foreign demand declined for the first time since April 2016.

As a result, overall demand rose at the slowest rate in its current 25-month sequence of expansion.

The ongoing slowdown of output and new orders weighed on both the labor market and business confidence.

The pace of job creation eased to near-stagnation, as cuts at large enterprises offset further increases at small and middle enterprises.

Business optimism dipped to a 22-month low in August. Business confidence was attributed to new capacity, expected growth of new export orders, planned investment and new product launches.

In August, inflationary pressures remained relatively strong, with both output charges and input costs rising at above survey average rates.

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