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UK manufacturing growth slows down in June but remains high

Export demand was buoyed as economic conditions across the world improved markedly

The UK manufacturing industry saw a slow down in growth in June, according to a survey released on Thursday.

The closely monitored IHS Markit CIPS manufacturing purchasing managers’ index dropped to 63.9, down from 65.6 in May, a record high. However, it remains well above 50, the level that indicates stagnation.

Expansion in output, new orders and employment are around the best levels in the survey’s near three-decades long history.

Businesses upped their spending as restrictions eased while demand for manufacturers’ goods became stronger.

Export demand was buoyed as economic conditions across the world improved markedly, with demand coming mostly from Asia, Europe and America.

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The strong upswing in global market conditions combined with constraints introduced to combat the Covid-19 pandemic continued to result in considerable supply-chain and price inflationary pressures in June.

Average input costs rose at the fastest pace in the survey history, with over three-quarters (77%) of manufacturers reporting an increase.

Commenting on the latest survey results, Rob Dobson, Director at IHS Markit, said:

“UK manufacturing maintained a near survey-record pace of expansion at the end of the second quarter, as the re- opening 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.”

“The sector is still beset by rising cost inflationary pressures, however, as Brexit-related trade issues exacerbated global supply chain delays. The resulting widespread raw material shortages drove purchase prices up to the greatest extent on record, leading to an unprecedented steep rise in selling prices. There are also widespread reports of supply issues causing disruptions to production schedules and impeding the re-building of buffer stocks,” Dobson added.

“The continued inflationary impact of capacity issues at both manufacturers and their suppliers will be a further factor keeping headline inflation above the Bank of England’s 2% target in coming months.”

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