Manufacturers hit by slowdown in new orders amid political uncertainty

● Purchasing managers’ index falls to 54.3 in June from 56.3 the month before

A slowdown in new orders saw growth in the UK’S manufacturing sector dip to a threemonth low last month, a new survey showed yesterday.

The closely watched Markit/ Cips UK manufacturing purchasing managers’ index (PMI) showed a reading of 54.3 in June, down from 56.3 in May and below a City economists’ consensus forecast of 56.4. Any reading above 50 denotes expansion.

Rob Dobson, senior economist at IHS Markit, said: “The main factor driving the broad slowdown in June was a steep easing in the rate of increase in new order intakes.

“New business rose at the weakest pace for nearly a year and growth was down sharply from April’s near three-year high.

“This slowdown was largely centred on the domestic mar- ket, where increased business uncertainty appears to have led to some delays in placing new contracts.

“Export orders remained disappointingly lacklustre despite the ongoing competitiveness boost of the weak sterling exchange rate.”

City economists believe uncertainty over the UK general election in June and the government’s eventual positioning of its Brexit negotiation strategy contributed to the drift down last month of manufacturing – roughly 12 per cent of the economy.

Despite the slowdown, the average PMI index reading for the second quarter of 2017 still reached a three-year high at 55.9.

Nearly one in two (48 per cent) of manufacturers also said they still expected output to be higher in a year’s time due to increased investment, new product launches and lift from new business.

However, Howard Archer, chief economic adviser to EY Scottish Item Club, said June’s slowdown will add to the concerns lingering over manufacturing.

“Increased prices for capital goods and big-ticket consumer durable goods, diminished consumer purchasing power and likely increasing business concerns and uncertainties over the economy and political situation look likely to hamper manufacturers,” he said.

Jamie Grant, head of corporate banking for Barclays in Scotland, said: “Production levels are still in positive territory but growth slowed to its lowest rate for three months and most disappointingly, given the weakness in sterling, was the slowdown in new export business. However, manufacturers have traded through challenging conditions before and in spite of this weaker performance, it is still the 11th consecutive month of increasing output.”