UK manufacturing growth slows to lowest level in seven months
By Josh White
Date: Wednesday 01 Jun 2022
(Sharecast News) - UK manufacturing growth slowed in May, according to fresh industry data released on Wednesday, as output, new orders and employment rose at weaker rates.
The seasonally-adjusted S&P Global/CIPS UK manufacturing purchasing managers' index (PMI) came in at 54.6 for the month - unchanged from the earlier flash estimate, and down from 55.8 in April.
It was still, however, above the 50-point level that separates expansion from contraction, where it has remained for 24 months.
"The rate of expansion in UK manufacturing output eased to a seven-month low in May as companies face a barrage of headwinds," said Rob Dobson, director at S&P Global Market Intelligence.
"Factories are reporting a slowdown in domestic demand, falling exports, shortages of inputs and staff, rising cost pressures and heightened concern about the outlook given geopolitical uncertainties.
"The consumer goods sector was especially hard hit, as household demand slumped in response to the ongoing cost of living crisis."
Dobson said that, with both input costs and selling prices rising at rates close to April's peaks, the surveys suggested there was no sign of the inflationary surge abating any time soon.
"Manufacturers continue to report issues getting the right materials, at the right time for the right price, and energy prices remain a major concern."
Manufacturing output itself increased at the slowest pace since October last year, with S&P Global saying the performance of the consumer goods industry was "especially weak", where production fell for the first time in 15 months.
Growth slowed at intermediate goods producers, although it accelerated in the investment goods category.
Weaker growth of new orders, meanwhile, led to reduced backlogs of work and increased holdings of finished goods inventory, while stock levels rose due to intentional replenishment and delays in the despatch of finished goods to clients.
Finally, UK manufacturing employment rose for the 17th successive month in May, albeit at the slowest pace since last October.
The outlook for the sector remained positive, with 55% of manufacturers expecting output to rise over the coming year.
However, confidence slipped to a 17-month low, amid fears of a possible global recession, rising cost pressures and stretched world supply chains.
"Forward-looking indicators from the survey suggest that a further slowdown may be in the offing," Rob Dobson added.
"Business optimism dipped to a 17-month low and weaker demand growth led to surplus production, meaning warehouse stock levels are rising.
"Any reversal of this stock-building trend could reinforce the drag of other headwinds and add to downside risks to the outlook."
Reporting by Josh White at Sharecast.com.
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