UK manufacturing growth slowed in June, according to a survey released on Thursday.
The IHS Markit CIPS manufacturing purchasing managers’ index fell to 63.9 from May’s record high of 65.6, coming in below the flash estimate of 64.2. A level below 50.0 signals contraction, while a level above indicates expansion.
The survey found that the industry was still beset by supply-chain and distribution issues, leading to longer vendor lead times and disruption to production schedules.
Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: “As global markets opened up still further in June, the manufacturing sector continued to enjoy a swell of new orders from home and abroad with work coming in from Asia, the US and Europe.
“Overall productivity however, showed some signs of slowing compared to the previous month as snarled supply chains were in danger of seizing up and operating capacity tightened.
“Supply chain managers worked around the clock to source ever-dwindling resources of raw materials, and building stock, resulting in supplier delivery times worsening again. The glut of purchases served only to exacerbate the shortages in transport and staff along with materials such as food and timber.”
Gabriella Dickens, senior UK economist at Pantheon Macroeconomics, said: “The Markit/CIPS survey suggests that the recovery in the manufacturing sector remained relatively strong in June, but we fear it will lose momentum in the second half of this year. While the PMI fell, it was still close to May’s record high and pointed to a further strong increase in output. Perhaps counterintuitively, however, the fall in the headline index would have been larger had it not been for disruptions to global supply chains.
“The suppliers’ delivery times sub-component – which falls when delays increase and is inverted for the PMI calculation – fell to 18.4, from 19.8 in May, its lowest level since April last year. These supply disruptions seemingly slowed the recovery, with the output index falling to 61.1, from 63.0 in May. Note too that the official measure of manufacturing output fell by 0.3% month-to-month in April, despite the rise in the level of the output index to a solid 59.2 in the same month, suggesting that Markit’s survey is understating the fallout from component shortages and delivery delays.”
In addition, Dickens pointed out that Brexit still is weighing on external demand, with the new export orders sub-component dropping to 55.2, from 59.7 in May, and undershooting the equivalent balance for the eurozone for the sixth consecutive month and to a greater degree than in May.
