UK manufacturing growth slows amid subdued demand from Europe

Growth in manufacturing eased last month to its slowest level in two years.

Growth in manufacturing eased last month to its slowest level in two years. - Credit: Getty Images/Hemera

Britain’s manufacturing sector grew at its slowest pace in more than two years last month, impacted by subdued demand from Europe.

The closely-watched CIPS/Markit purchasing managers’ index (PMI) survey showed the sector posted a lower-than-expected reading of 51.4, where 50 separates growth from contraction.

This is the weakest growth reading since April 2013 and compares with last month’s revised figure of 52. Economists had expected a reading of 52.3.

The data topped off a poor second quarter for the factory sector, which was the weakest three months for output growth since the first quarter of 2013 due to fewer new orders.

The report said manufacturing growth in the second quarter was kept moving by consumer goods production, which expanded “at a solid clip”.

The news comes after yesterday’s official figures showed that Britain’s economy grew more strongly than previously thought in the first quarter of the year.

Gross domestic product (GDP) increased by 0.4% between January and March, up from a previous estimate of 0.3%, according to the Office for National Statistics.

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But experts said the disappointing performance from the manufacturing sector deals a blow to hopes for a marked pick-up in second quarter growth.

Rob Dobson, senior economist at Markit, said: “The UK manufacturing sector had a disappointing second quarter overall.

“Export trade is also likely to remain a drag on the economy, given the uncertainty surrounding the Greek debt crisis.”

Manufacturing accounts for 13% of the UK economy, which is dwarfed by the services sector - responsible for 80% of the country’s output.

Capital Economics chief UK economist Vicky Redwood said: “June’s disappointing Markit/CIPS report on manufacturing suggested that the industrial side of the economy is playing no role in the economic recovery at the moment - indeed, it may even have dragged on overall GDP growth in the second quarter.”

The report added selling prices among manufacturers had fallen in five of the last six months, adding that the strong pound also impacted eurozone exports.

HSBC economist Elizabeth Martins said: “The recovery in manufacturing growth has been losing momentum for the last year, but the PMI survey suggests it could slow further still - meaning that as usual, the onus remains on the service sector to drive UK growth.”

Mr Dobson added: “It is also disappointing that for a nation now steeped in rebalancing rhetoric, it seems as if domestic consumer-driven expansions remain the norm.”