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Output in the manufacturing sector increased in June

Output in the manufacturing sector increased in June

Output in the manufacturing sector increased slightly in the month of June.

The latest figures from the seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index (PMI) revealed a figure of 54.4 for the month.

This is broadly similar to the figure recorded in May; although this has been revised downwards to 54.3, it originally stood at 54.4, exactly like June.

However, the rate of output has slowed down somewhat from May; in that month, the rate of growth was at a five-month high, whereas now, although the PMI highlights there has been growth in output, it has barely increased faster than was seen in May.

Although still healthily above the 50.0 PMI which signifies no change in the rate of output, the figure is still well below the 51-month high of output in the manufacturing sector recorded in November 2017.

According to the release by Markit, the upturn remained ‘broad-based’ in June. There were increases in output and new orders across the consumer, intermediate and investment goods industries.

New orders improved only mildly though, with respondents suggesting activity came from clearing backlogs of previously unfinished work.

The rate of increase in new business was one of the weakest registered over the last 18 months. However, June’s rate of new business hit a high not seen for three months.

Optimism remained in business leaders; 51% said they expect to see output in the sector increase in the next year, with market growth, investment spending, organic expansion, planned promotional activity and higher capacity all reasons for the optimism.

Confidence was, however, at a seven-month low, and Rob Dobson, Director at IHS Markit, believes Brexit uncertainty is causing this.

“The slowdown in new order growth since earlier this year has also left manufacturers increasingly reliant on backlogs of work and inventory building to maintain higher output.

“This is a position that cannot be sustained far beyond the immediate horizon. The trend in demand will need to stage a much firmer rebound if a further slowdown in output growth is to be avoided.

“How likely such a revival is remains in some doubt, with the June survey also seeing business optimism drop to a seven-month low amid rising concerns about possible trade tariffs, the exchange rate and Brexit uncertainty.”

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