UK manufacturing growth slows to two-year low in June

Growth in the UK manufacturing sector slowed to a two-year low in June, according to a survey released on Friday.

The S&P Global/CIPS manufacturing purchasing managers’ index fell to 52.8 from 54.6 in May, coming in below consensus expectations and the flash estimate of 53.4. A reading above 50.0 indicates expansion, while a reading below signals contraction.

New orders contracted for the first time in 17 months and business optimism hit its lowest since May 2020, as the number of firms expecting production to rise over the coming year fell to 47% in June from 55% a month earlier.

The new orders index declined from 51.1 in May to 48.3 in June - its worst level for two years.

Companies said a weaker economic outlook, reduced new export order intakes, slower growth of domestic demand, the war in Ukraine, raw material shortages and the slowdown in China all contributed to the reduction in new work received.

Rob Dobson, Director at S&P Global Market Intelligence, said: "UK manufacturing output growth ground to a near standstill in June, as intakes of new work contracted for the first time since January 2021. Domestic market conditions became increasingly difficult and foreign demand fell sharply again, stifled by Brexit, transport disruption, the war in Ukraine and a global economic slowdown. Business confidence took a hit as a result, dipping to its gloomiest since mid-2020. Jobs growth also slowed sharply amid the increasingly uncertain outlook and recent surge in energy costs.

"The consumer goods sector was especially hard hit, as household demand suffered a steep retrenchment on the back of the cost-of-living crisis.

"There were some welcome signs that supply-chain constraints and cost inflationary pressures may have passed their peaks. However, with these constraints still elevated overall and demand headwinds rising, it is likely that UK manufacturing will see the economic backdrop darken further in the second half of the year."