PMI hits 17-month low as new order growth slows
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Growth of the UK manufacturing sector slowed further in September, as companies reported weaker increases in production, new business and new export orders. Price pressures were also relatively muted, as output charge inflation slowed further and input costs fell for the first time in five months.
At 51.6 in September, the seasonally adjusted Markit/CIPS Purchasing Manager's Index (PMI) fell to a 17-month low and a reading only slightly above its long-run average of 51.5.
The average PMI reading in the third quarter (52.8) was also the weakest since the second quarter of last year and down sharply from those seen during the first half of this year.
The mid-year slowdown in the rate of expansion of manufacturing production continued in September, as growth of new orders eased to near-stagnation.
Companies indicated that new business rose at softer rates from both domestic and overseas markets.
Growth of new export business was the slowest in the current 18-month sequence of increase, as the sterling-euro exchange rate and weaknesses in the euro area economy impacted on sales to a number of nations within the currency union. Where an increase in new export orders was reported, this reflected demand from North America, Germany, Scandinavia and the Middle East.
In contrast to the output and demand indicators, job creation accelerated during September, regaining most of the momentum lost in the prior month.
However, the rate of increase in payroll numbers remained below those registered during the opening half of the year.
Lee Hopley, chief economist at EEF, the manufacturers' organisation, said: "[The] positive news on manufacturing output in the first half of 2014 was tempered today by a weaker than expected PMI reading for September. Activity is still on the rise with the survey reporting growth in new business from domestic and overseas markets, but the pace of expansion is clearly levelling off – a trend now seen in all manufacturing surveys. The flat picture in European markets is inevitably proving to be a drag on export demand, with manufacturing activity across the region at a 14 month low. Our forecasts, nevertheless, continue to show output and employment growth in the official data through the remainder of this year."
