Manufacturing confidence falters

The BDO Optimism Sub-Index for the manufacturing sector, which predicts growth expectations in six months' time, fell from 121.0 in May to 119.5 in June. BDO said: "Although it remains well above the 100 mark that indicates the long term growth trend, the dip suggests that manufacturers are taking a more considered approach to potential challenges, such as rising operating costs, which could act as a drag on growth." The BDO Inflation Index, meanwhile, remained broadly unchanged at 97.9 in June. BDO explained: "This indicates continuing low inflation expectations across the economy, but could also mask the threat to manufacturers of rising oil prices, a major operating cost. Labour-intensive services firms, on the other hand, continue to benefit from low wage growth as spare capacity in the economy is used up." BDO partner Peter Hemington said: "UK manufacturers are under growing pressure from a shrinking pool of skilled workers and potential input cost increases, but confidence in the sector is high and firms are still looking to expand well above their long term trend rate over the next six months. This month's dip in confidence is a rational response to the issues that businesses face and nobody should have expected the stellar growth we've seen in manufacturing so far this year to go on forever."