Wednesday, June 01, 2011
Manufacturing growth weakens
Posted by David Smith at 10:00 AM
Category: Thoughts and responses

Separating the underlying trend in manufacturing from the impact of extra bank holidays, supply-chain disruptions in Japan and other temporary factors is tricky but growth does appear to be weakening, mainly as a result of very subdued domestic demand. The purchasing managers' index for manufacturing dropped from a downward revised 54.4 in April to a 20-month low of 52.1 in May.

Markit, which produces the index for the Chartered Institute of Purchasing and Supply, offered this interpretation: “The UK PMI suggests that manufacturing has moved from rapid expansion to near-stagnation. The headline index slipped to a twenty-month low in May as production and new orders contracted slightly following near-record growth in the opening quarter. Domestic market weakness was the main drag on order books and output. However, this was exacerbated by the additional bank holidays in late April, which fell during the early part of the latest survey period, and ongoing supply-chain disruption following the Japanese earthquake. Consumer goods producers and small-scale manufacturers have been hit hardest by the slowdown.

“On the plus side, job creation held up comparatively well in May, while inflation of input costs and factory gate prices moderated following recent declines in the price of oil and other commodities. However, continuing the increase in employment will be reliant on the trends in order books and output improving.”