Production growth weak as Brexit hits optimism

UK manufacturers are at their least confident for nearly two years about the prospects for a rise in their business activity on a 12-month view, with Brexit uncertainty cited as a key factor, a survey has revealed.

And manufacturing growth slowed in July, according to the survey published yesterday by the Chartered Institute of Procurement & Supply, fuelling worries among economists over the sector’s performance and prospects.

The manufacturing output index dropped from 55.3 in June to 54 last month on a seasonally adjusted basis, to signal the weakest pace of increase for 16 months.

The survey also shows a slowing of growth of new orders in the manufacturing sector to its weakest pace in 13 months, even though the rate of increase of incoming export business accelerated to its fastest since January.

CIPS’S purchasing managers’ index for UK manufacturing, which measures changes in output, new orders, employment, suppliers’ delivery times and stocks of goods purchased, fell from 54.3 in June to 54 last month. Although it remained above the level of 50 deemed to separate expansion from contraction, it signalled the slowest growth in broad activity in the sector for three months.

The future output index, which measures manufacturers’ expectations of whether their production volumes in 12 months’ time will be higher, lower or the same as now, fell from 72.6 in June to a 21-month low of 69.8 in July.

CIPS said: “July saw the degree of positive sentiment dip to a 21-month low, amid reports of uncertainty regarding both Brexit and the exchange rate.”

In spite of this deterioration in anticipated prospects, CIPS noted that nearly 48 per cent of manufacturing companies still expected output to be higher in one year’s time, with only 8% forecasting a contraction.

The survey also highlights continuing inflationary pressures in the UK

Continued on Page 25