Thursday 01 July 2021 11:55 am | Updated: Thursday 01 July 2021 11:59 am

UK manufacturing growth slows in June

UK manufacturing PMI pulls back from May's record high

Growth in the UK’s manufacturing industry slowed over the last month, according to a closely watched business survey published today.

The IHS Markit/CIPS Purchasing Managers’ Index dropped to 63.9 in June, down from May’s record high of 65.6.

A reading above 50 indicates growth in the industry.

Manufacturing still expanded at a rapid pace over the last month. Output growth was strong in June, while new orders and recruitment activity was among the strongest since the survey started.

Stronger demand for manufacturers’ products was linked to firms ramping up spending after restrictions to curb the spread of coronavirus continued to be eased. Improving global market conditions helped to boost export demand, with demand strongest in mainland Europe, the US and Asia.

Hiring in the manufacturing industry continued its recovery from Covid lows, rising at a rate close to May’s record high. Improved employment prospects in the industry reflects a need to clear a near-work backlogs and growing optimism among firms, the survey said.

Rob Dobson, director at IHS Markit, says: “UK manufacturing maintained a near survey-record pace of expansion at the end of the second quarter, as the reopening of economies at home and overseas supported increased production, new orders and employment.”

“Solid business confidence and rising backlogs of work also suggest that the current upturn has further to run.”

Surging input costs drive inflation

The survey showed average input costs for manufacturers are rising at a record pace, prompting firms to raise the selling price of their goods.

Average input costs increased at the fastest pace in the survey’s 20 year history, with over three quarters of manufacturers reporting a rise.

Firms passed these higher costs to consumers at a rapid rate as selling price increases were also the fastest in the survey’s 20 year history.

Martin Beck, senior economic advisor to the EY Item Club, says: “June’s survey also highlighted two interrelated issues which are likely to be key influences in the second half of this year – supply chain disruption and cost pressures.”

“The semiconductor shortage, which is a function of strong demand, should ease through the second half of the year, as increased supply comes on stream, though it is likely to cause problems for some sectors in the intervening period.”