S&P Global UK manufacturing purchasing managers' index registered 50.9 in June, a slight decrease from May's 22-month high of 51.2 and below the earlier flash estimate of 51.4. It still remains above the critical 50 mark that separates expansion from contraction.
This growth occurred because of an increase in new orders, as companies focus on ramping up production and improving backlogs. In addition, positive performance was attributed to strong domestic demand as new orders in the UK boosted production in consumer and investment goods categories.
Despite the slow growth, manufacturers are still struggling with the highest input cost inflation since January 2023. Increases in energy, food and packaging costs have posed challenges that impact on profit margins and pricing strategies for firms.
Rob Dobson, Director at S&P Global Market Intelligence, said: "The UK manufacturing sector is enjoying its strongest spell of growth for over two years, with June seeing output and new order growth sustained at robust rates similar to May's recent highs."
"The performance of the domestic market remains a real positive, providing a ripe source of new contract wins. In contrast, the ongoing weak export performance is concerning, with manufacturers reporting difficulties in securing new business in several key markets including the US, China and mainland Europe."
The composite PMI is compiled by S&P Global from responses to questionnaires sent to survey panels of around 650 manufacturers and 650 service providers in the UK. Responses were collected between June 12 and 25.
