Export slump hits factories
FACTORY growth fell to its weakest for over two years in August and optimism among manufacturers is at a 22-month low after export orders dried up.
The boost from a weaker pound which had made UK firms more competitive and driven demand from overseas disappeared as new export orders contracted for the first time since April 2016.
The purchasing managers’ snapshot confirms this year’s slowdown in the sector, which generates 10 per cent of GDP, after a strong second half of 2017.
Sterling fell 0.7 per cent against the US dollar and the euro. Manufacturing contracted 0.9 per cent in the second quarter from the previous three months.
The IHS Markit/CIPS purchasing managers’ index hit a 25-month low of 52.8, down from 53.8 in July but still above the 50-point mark denoting growth. Firms linked lower inflows of new work from abroad to the weaker global economy expansion.
Job creation slowed to “near-stagnation”, while companies faced rising cost pressures due to higher prices for metals, electronic components and energy.
IHS Markit director Rob Dobson said manufacturing will not provide any support to the wider economy in the third quarter, amid trade war and Brexit uncertainty.
He added: “The main constraint was the trend in new export business. Foreign demand declined for the first time since 2016 despite the weakness of sterling.”
Capital Economics’ Andrew Wishart said: “The possibility of a ‘no deal’ exit from the EU and a moderation in global growth is starting to weigh on the sector, and there is little chance of a rebound in manufacturing in the third quarter.”
Retail sales struggled for growth in August as consumers focused their spending on pubs and entertainment.
Spending was up 4.5 per cent from the previous year, with ticket sales and pub spending boosting entertainment by 10.3 per cent, according to Barclaycard. But the British Retail Consortium-KPMG retail sales monitor showed UK retail sales growing just 0.2 per cent on a like-for-like basis.
BRC chief executive Helen Dickinson said: “The pressure on disposable income has meant some shoppers are less able to spend on the more discretionary non-food items such as clothing and footwear.”