Markit/CIPS PMI for manufacturing increased in July

Employment has increased for 27th month in succession.

The seasonally adjusted Markit/CIPS Purchasing Manager’s Index (PMI) for manufacturing in July has been released today, with the figure edging higher than June’s 26-month low.

Although it is below the average for the current sequence of growth which commenced in April, the figure has increased from 51.4 in June to 51.9 in July.

Despite being described as “near-stagnant,” the growth in the sector remains higher than the neutral figure of 50.0 which would represent no growth at all.

Production expansion was recorded, which came about largely because of the performance of the consumer goods sector.

This strong domestic market performance helped to offset struggles for the intermediate goods producers and investment goods sectors.

In some instances, output price increases were recorded. The chief reason for this was improved inflows of new business.

New orders, however, slowed down because the solid demand from the domestic market is in contrast with a decrease in new export business.

A positive outcome from today’s PMI figures is that output in manufacturing increased again, with July’s rise signifying the 27^th consecutive month where an increase was recorded.

Two reasons were generally seen as the main drivers of this increase; where there was an ongoing upturn in new orders, and in areas where effort was required to reduce or clear backlogs of work.

However, exports struggled according to the latest figures with new orders declining for a fourth successive month. Meanwhile, new work levels from overseas slowed in intermediate and investment goods sectors.

There was good news with consumer goods producers though, as levels of new work from overseas in this sector increased solidly.

Rob Dobson is the Senior Economist at Markit – compilers of the survey – and he explained the reasons for today’s figures.

He said: “Although an uptick in the headline PMI breaks the decelerating trend in UK manufacturing, growth remains near-stagnant and suggests that the sector is continuing to act as a drag on the economy.

“With the sterling-euro exchange rate still sapping export demand and constraining growth of total order inflows, it seems that we will again look to the service sector to sustain any semblance of reasonable economic growth in the third quarter.”

David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply, added that there may be uncertainty in the coming months.

“Slowly does it this month, as the sector stays in positive mode, but at a softer rate of growth than hoped for given the trend since April 2013,” he said.

“Employment continued to rise which enabled backlogs and current contracts to make significant headway.

“However, the sector must be wondering how the absence of a significant number of new orders will affect manufacturing performance in the coming months.”

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