Manufacturing suffers drop in output as costs escalate
OUTPUT IN Britain’s manufacturing sector has unexpectedly slipped at the start of the year as the industry grappled with a double-whammy hit of slowing growth and escalating costs.
The closely watched Markit/ CIPS UK Manufacturing purchasing managers’ index (PMI) showed a reading of 55.3 last month, down from 56.2 in December, with economists expecting a figure of 56.5.
A reading above 50 indicates growth.
Despite chalking up another solid rise, the rate of expansion drifted to a six-month low and came in shy of November’s heady climb when the sector reached its highest level for more than four years.
January’s slowdown was coupled with biting price pressures, as firms were confronted by a perfect storm of increased input demand and a shortage of raw materials, causing purchasing prices to hit an 11-month high.
Rob Dobson, director at IHS Markit, said: “Encouragingly, despite the slowdown, the latest survey is consistent with production rising at a solid quarterly rate of around 0.6 per cent in January, with jobs also being added at a faster pace.
“However, output growth has slowed sharply since last November’s high, and the more forwardlooking new orders index has slipped to a seven-month low.
“The trend in demand will need to strengthen in the near term to prevent further growth momentum being lost in the coming months.”
Sterling was little moved by the announcement, trading up 0.5 per cent at $1.425. The report revealed output and new orders had enjoyed a “solid increase” across the consumer, intermediate and investment goods sectors.
Overseas appetite for UK products also proved strong in January, expanding at the fastest rate for four years thanks to rising sales in China, Japan, North America, the Middle East and Europe.
Despite the stuttering start to 2018, more than 55 per cent of manufacturing firms expect production to grow in 12 months’ time, as they feel more confident about the prospect of bulkier order books and overseas growth.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said January’s slowdown was largely driven by weaker demand on home soil.
He said: “The recovery in the UK’s manufacturing sector lost more momentum in January.”
The recovery in the sector lost more momentum in January. Samuel Tombs, chief UK economist at Pantheon Macroeconomics