Manufacturers struggle amid weak demand

 
Chris Papadopoullos
Follow Chris
GROWTH in the UK’s manufacturing sector was sluggish in July, new survey data reveal, as firms struggle to export.

It contrasts with robust manufacturing growth in the Eurozone, with Italy seeing the sector’s fastest expansion for four years. However, Eurozone exports also suffered from weak global de­mand.

The widely watched UK Markit manufacturing purchasing managers’ index (PMI) rose to a score 51.9 in July, figures showed yesterday. It is ahead of the June’s 51.4, and above the crucial 50 mark which indicates growth.

But it remained well below the average of 54.3 recorded since April 2013, when the UK economy was beginning to bounce back from the global financial crisis.

The survey also indicated that growth was being fuelled by UK consumers, as opposed to businesses that are invest­ing in or foreigners buying British goods.

“Domestic demand and consumer goods continued to drive growth as other sub-sectors carried on stagnating or falling behind,” said David Noble, chief executive of the Chartered Institute of Procurement and Supply.

“New orders from export markets stayed lifeless as the impact of the sterling exchange rate against the euro dampened any possible hot spots of new orders from the Eurozone.”

A pound can currently be exchanged for €1.42. This is up 10 per cent from the €1.29 sterling could buy in January. The rise makes British goods more expensive to people who receive their income in euros.

“The sector continues to face real export challenges to Europe from the weak euro,” said Mark Stephenson, UK manufacturing industry leader at Deloitte. The Eurozone’s manufacturing sector has also suffered from weak growth in exports.

“For the Eurozone as a whole, the news from the manufacturing sector for July has not been too bad given the circumstances. The single currency area seems to have weathered the storm over Greece relatively well. But, weaker global activity looks to be weighing on activity,” said economist Gizem Kara from investment bank BNP Paribas.

But some say growth in the Eurozone is about to turn a corner, which could lift demand for UK goods.

“The conditions are still in place for a modest Eurozone cyclical upturn. Oil prices, the euro and bond yields are all still at low levels that are very supportive to Eurozone growth,” said economist Howard Archer from analysts IHS.

Related articles