Manufacturing industry set for further slowdown as PMI figures remain weak

Jake Cordell
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The UK manufacturing industry remains a drag on growth
The UK manufacturing industry remains a drag on growth (Source: Getty)

The manufacturing industry is still in the doldrums, according to the new data out today which points to a marked decline in output in the run-up to the EU referendum.

The sector clocked a score of 50.1 on the Markit/Chartered Institute of Procurement and Supply (Cips) purchasing managers’ index (PMI) for May, where scores above 50 indicate expansion. This was up from a disappointing 49.2 in April’s survey, though experts said it would not be enough to arrest the broader decline.

“The UK manufacturing sector continued its lacklustre start to 2016,” confirmed Rob Dobson, senior economist at Markit.

The production sector - 70 per cent of which is made up by manufacturing - slipped into its third recession in a decade in the first three months of the year, as output contracted for the second consecutive quarter.

EEF, the manufacturers’ association warned that “the very modest improvement in activity wasn’t enough to prevent further job losses across the sector”.

Lee Hopley, chief economist at the group, said that while referendum nerves were playing some role in the sector’s decline, “this is a demand story rather than a Brexit one”.

Manufacturing is expected to contract again in the second quarter of this year. Howard Archer of IHS Global said output was “essentially at a standstill”. Martin Beck at the EY Item Club said the sector should prepare for “a very weak performance,” while Markit said manufacturing will “remain a drag on broad economic growth [and] add pressure on the service sector to sustain the upturn in GDP".