The latest data from Markit and the Chartered Institute of Purchasing and Supply (CIPS), showed that growth in the sector was 51.9 in July, after hitting a 26-month low in June.
The UK Purchasing Managers’ Index measures growth in the sector on a month-by-month basis, where anything under 50 represents contraction, and anything over 50 represents growth. The reading for July was 51.9, meaning there was some growth in the sector last month. Although this indicates that growth is still somewhat sluggish, it was higher than forecast and better than the 51.4 reading in June, which was the lowest reading for 26 months. However, the 51.9 reading is still well below the sector average, which has been 54.3 since April 2013.
Although some businesses have seen a decline in orders over the last few months, a number of companies such as FANUC UK, who specialise in automation and robotics, have been experiencing strong growth. “We’ve seen orders grow by 25 per cent, particularly within the medical sector, driven by healthy domestic orders and relatively buoyant export market driven by a more stable European market” said Chris Sumner, the Managing Director of FANUC UK.
However, although domestic orders have been strong and the European market has been stabilising, the strength of the British Pound against the Euro has had a negative impact on demand from Europe. This is reflected in the decline in new export orders since April 2015. Fortunately this decline has been somewhat counteracted by strong consumer demand.
Despite rumours of Governor Mark Carney planning to raise interest rates above 0.5% (they have remained at this unusually low level since 5th March 2009), on 6th August the Monetary Policy Committee voted 8-1 that the interest rate should be held at 0.5%. In addition to this, the mixed economic data suggests that many businesses in the country are still not ready for a higher base interest rate.
The manufacturing sector wasn’t the only sector that experienced slower rates of growth in July; the service sector also experienced slower growth. Employment growth in the sector was at a 12-month low. But this was somewhat saved by the fact that the financial services sector experienced very strong growth. “If financial services providers had not seen the fastest growth since 2013, the fall in the survey would have been even sharper, with slower rates of expansion recorded in all other services subsectors” said Chris Williamson, chief economist at Markit.
For ideas on growing your manufacturing business, you can look at our post on growing your manufacturing business in 2015.
Here at County we work with a number of manufacturing businesses, helping to facilitate the purchase of new machinery and equipment. You can find out more about our Asset Finance Solutions here, or you can email us at sales@countyfinancegroup.co.uk or even better, you can call us on 01455 200 150.
