Shock drop in UK manufacturing growth – are the finest days of UK recovery over?
A weaker outlook for the manufacturing sector has led some analysts to suggest that the best days of the UK recovery have now passed
Poor manufacturing data could signal the end of a hot streak for UK growth. Surveys of the nation’s manufacturing sector saw an unexpected fall this August, as purchasing managers’ index (PMI) figures dropped from 54.8 to 52.5. While still above 50 – suggesting that the sector continues to expand – the data pointed to a fall in the pace of growth.
“While the worst days of the recession are definitely behind us”, said Jeremy Cook, of currency firm World First, “PMI surveys also suggests that the finest days of the recovery are too.”
The survey pointed to a “broad slowdown” that is underway in the UK’s manufacturing sector, according to Markit, who compiled the report.
Manufacturers “were walking rather than running in August as the sector’s performance fell to a 14-month low”, said David Noble, of the Chartered Institute of Purchasing & Supply.
Rob Dobson, senior economist at Markit, said: “It is also becoming increasingly evident that UK industry is not immune to the impacts of rising geopolitical and global market uncertainty, especially when they affect economic growth and business confidence in our largest trading partner the eurozone.”
He expects manufacturing will “provide a lesser contribution to the UK economic growth story in the third quarter than at the start of the year”.
Sterling gave back gains against the dollar and euro on Monday after the data, falling to $1.6627 from $1.6645 beforehand the release.
Downward revisions to July’s data also painted a weaker picture of the sector’s strength.
July’s headline PMI reading was revised down from 55.4 to 54.8.
Paul Hollingsworth, UK economist at Capital Economics, highlighted subcomponents of August’s survey which suggested that “the meagre 0.2pc rise in the official measure of manufacturing output may be repeated in the third quarter”.
Yet even if the manufacturing sector has lost some steam, “growth should remain robust over 2014 as a whole”, said Mr Hollingsworth.