Monday, August 01, 2011
Where's the manufacturing growth?
Posted by David Smith at 10:10 AM
Category: Thoughts and responses

Manufacturing has had a bad July throughout Europe, according to the Markit purchasing managers' indexes. But Britain appears to have fared particularly badly. The PMI dropped from 51.4 in June to 49.1 in July. With no obvious special factors, this was bad news. Output is just about expanding but everything else is weak.

This is Markit's assessment:

“The Manufacturing PMI retreated into contraction territory in July. Growth of output reached a near standstill following the steepest decline in new orders for over two years, while payroll numbers were lowered for the first time since March 2010. This is a marked turnaround from the strong start made to the year.

“It is not entirely unexpected given that three of the pillars supporting the surge during Q1 – inventory rebuilding, a purple patch in global growth and stable domestic demand – have somewhat crumbled. Even though the weak sterling exchange rate is still supporting overseas sales, softer economic growth in key trading partners means it is having a much lesser impact at a time when domestic demand is contracting. With austerity arriving at home and debt ills rising in the US and euro area, significant headwinds are on the horizon.

“More positive news was seen on the price front. Inflation of input costs and output prices both moderated, while supply-chain pressures subsided, providing additional support to the Bank of England’s belief that inflationary pressures will prove transitory.”