Manufacturing export order growth slows

The bounce-back in Britain's manufacturing industry showed signs of cooling last month as export order growth almost ground to a halt, according to figures out today.

The Chartered Institute of Purchasing and Supply's (CIPS) activity index, where a reading over 50 indicates growth, eased to 57.5 in June. This was the ninth month of growth in a row, but down on the 15-and-a-half-year high of 58 seen in April and May.

Export orders - a key support to the recovery in recent months - slowed sharply as the eurozone debt crisis and a stronger pound hit sales to mainland Europe. New export business posted only a marginal increase in June having hit a record high for the Markit/CIPS survey only two months earlier.

Rob Dobson, senior economist at Markit, said the survey suggested "conditions may have passed their peak". He added: "With the impact of austerity measures on demand - both here and abroad - still unknown, the latter half of the year may provide a real test for the sustainability of the recovery."

But there was some good news on the jobs front as manufacturers increased employment at the fastest rate since February 1995. The Purchasing Managers' Index of activity reported ongoing strength in domestic demand, with June marking the 12th straight month of higher incoming new orders. The June survey capped a strong second quarter for the sector, with indications that output was close to that seen in the first.

The UK manufacturing industry has already recouped around a third of the output lost during the recession thanks to a "remarkable" rebound, according to Mr Dobson.

But there are concerns the rest of 2010 will be far tougher, with the fragility of Europe's economy knocking the wind out of an export-led recovery.

David Noble, CIPS chief executive, said: "It's been a tense month for the UK manufacturing sector. The sector maintained strong momentum in June, but looming headwinds are causing some insecurity. All eyes will be peeled to see if the sector can carry forward this strong pace in the second half of the year."

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