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UK manufacturing PMI sinks to six-year low in June - IHS Markit

UK manufacturing PMI sinks to six-year low in June - IHS Markit
FILE PHOTO: A man works on an electrical component on the factory floor of PP Control and Automation near Cannock, Britain, July 6, 2016. REUTERS/Phil Noble/File Photo -
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LONDON, July 1 (Reuters) – British manufacturers suffered the sharpest fall in activity in more than six years last month against a backdrop of Brexit uncertainty and global trade tensions, a survey showed on Monday, adding to signs of economic weakness.

The IHS Markit/CIPS manufacturing purchasing managers’ index (PMI) slumped to 48.0 in June from May’s 49.4, well below the average forecast in a Reuters poll of economists and its lowest reading since February 2013.

The PMI’s output component dropped to 47.2 from 50.3 in May, pointing to the biggest contraction since October 2012.

“The downturn in UK manufacturing deepened during June as the impact of firms unwinding stockpiles built before the original Brexit date continued to reverberate through the sector and exacerbate weak demand,” IHS Markit economist Rob Dobson said.

Export demand fell for a third month as manufacturers around the world lost confidence amid the trade conflict between the United States and China.

Although the PMI numbers have sometimes proved gloomier than official data at times of political uncertainty, the reading for June is not alone in pointing to a slowdown in Britain.

Earlier on Monday, the British Chambers of Commerce reported the weakest picture for domestic manufacturing orders in seven years, while the Confederation of British Industry said on Sunday that private-sector activity fell by the most since 2012 in the April-June period.

Official data last week showed Britain’s economy grew 0.5% in the first quarter of 2019, but that growth was boosted by factories stockpiling supplies ahead of expected disruptions when Britain was due to leave the European Union on March 29.

The stockpiling boost has now gone into reverse, and many economists – including Bank of England forecasters – think overall growth slowed to a halt in the second quarter, exacerbated by widespread Brexit-related stoppages in the car industry in April.

Monday’s PMI data, which was based on responses from companies between June 12 and 25, showed little sign of the rebound some economists think might come over the next couple of months, with new orders falling by the most since July 2012.

Britain is now due to leave the EU on Oct. 31, and both candidates vying to succeed Theresa May as prime minister say they are prepared to go through that without a transition deal if necessary.

Without a deal, British goods risk long delays at European ports, and Monday’s data suggested manufacturers were battening down the hatches.

“Businesses were cutting back on both day-to-day and capital spending in increasing numbers,” IHS Markit’s Dobson said. Consumer goods were the only area of manufacturing to gain in June.

(Reporting by David Milliken; Editing by Hugh Lawson)

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