Making a bad start to 2018
Manufacturers report weaker growth
THE Government’s hopes of a 2018 economic revival suffered a blow yesterday as the year’s first data revealed a slowdown for UK manufacturing.
The latest IHS Markit/CIPS UK Manufacturing purchasing managers’ index showed a reading of 56.3 in December, down from 58.2 in November, as manufacturers recorded weaker growth in output, new orders and employment.
The below-forecast levels compared badly with Eurozone figures which hit a 17-year high last month – however, IHS Markit said the UK figures were “solid”.
Rob Dobson, director at Markit said: “Although growth of output and new orders particularly in the consumer goods sector moderated during December, rates of expansion remained comfortably above longterm trend rates. “The outlook is also reasonably bright, with over 50% of companies expecting production to be higher one year from now.” Samuel Tombs, chief UK economist at Pantheon Macroeconomics, was less positive, suggesting the figures showed manufacturers would continue to struggle this year. He said: “UK manufacturers have cut investment since the Brexit vote and are struggling to find skilled workers. As result, backlogs are increasing quickly and supply chain delays are worsening. “These constraints will only worsen unless manufacturers suddenly ramp up investment.” Other analysts suggested that the strengthening of sterling could hit manufacturer performance and impact Bank of England thinking on the direction of interest rates.
“A slight decline in UK manufacturing activity shows how even the modest gains made by the pound in late 2017 could provide a headwind to companies and their exports,” said Russ Mould of AJ Bell.
“While the Bank of England may be happy to see the pound rise on the inflation front, governor Mark Carney will doubtless tread carefully when it comes to further interest rate rises in 2018, given how a weak pound has helped to support manufacturing over the past 18 months.”