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Unexpected slowdown of manufacturing sector, but it’s still at a three-year high

Concerns over an unexpected slowdown of the manufacturing sector led to a fall in the pound when the PMI figures were released in early July. The latest PMI figures revealed a fall to 54.3, however, the sector hasn’t fallen into contraction. Growth in exports also proved disappointing, as was the level of new orders.

Business uncertainty is thought to be a contributing to the unexpected fall, but there are other issues too.

Commenting on the figures, Rob Dobson, who serves as the senior economist at HIS Market said:

“The main factor driving the broad slowdown in June was a steep easing in the rate of increase in new order intakes.”

Manufacturing at a three-year high

As George Nikolaidis, Senior Economist at the manufacturers’ organisation EEF, made clear, it’s not all bad news for the manufacturing sector.

Nikolaidis stated:

“Despite a broad-based slowdown in the rate of expansion in June, manufacturing activity for the last quarter still came in at a three-year high, pointing to a solid contribution from the sector to growth. This adds to recent data over the past few months indicating that industry will continue to support the UK economy by providing a counterweight to slowing services output.”

The EEF has also stressed the importance of the government providing some clarity over its Brexit strategy so the manufacturing sector can start making firm plans regarding recruitment and investment.

Economic activity slows among other sectors

It should also be noted that the slowing in economic activity wasn’t just limited to the manufacturing industry; both the service and distribution sectors were affected in the last quarter, according to a CBI survey.

Commenting on the latest survey, the CBI’s chief economist, Rain Newton-Smith said:

“Growth has slowed across our surveys for a second successive month and expectations for the quarter ahead have cooled.

"With the economy shifting down a gear, and higher inflation eating into household incomes, it’s vital the Government creates the right environment for businesses to continue contributing to the country’s prosperity.

Manufacturing, productivity and innovation

There have already been calls for the government to do more to enhance productivity and innovation in the manufacturing sector, which is going to be essential to all industries as the UK comes out of Europe. And in a press release issued by the CBI, it reiterated the need for government to assist businesses by providing support for improved innovation, infrastructure and exporting.

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