Manufacturing loses momentum
1 Jun 2015
Figures released today suggest manufacturing is growing at a slower rate than expected, though CIPS’ figures tell a slightly different story.
The Manufacturing Outlook Survey, published quarterly by trade body EEF and global law firm DLA Piper, reveals a loss of momentum in manufacturing output and orders during the second quarter of 2015.
As a result of the findings, the EEF said it was “softening” its 2015 manufacturing growth forecast to 1.5%, while dropping its overall forecast for the economy to 2.6%.
This weakening trend looks set to continue, potentially even through to the end of the year
EEF chief economist Lee Hopley
However, the EEF said the sector was still in “positive territory”, though it is showing signs of a “steady weakening” in key indicators, most notably in UK demand and investment plans.
This is due largely to turbulent activity in the oil and gas sector on supply chain industries, where investment delays have knocked UK orders, EEF said.
“There is a range of challenging factors at play, but the net result is that this weakening trend looks set to continue, potentially even through to the end of the year,” said EEF chief economist Lee Hopley.
Last month’s general election has also been partially blamed for the recent downturn in manufacturing momentum, with Hopley calling on the new Conservative government to take all the necessary steps in boosting manufacturing growth, employment, investment and productivity.
However, the study does contain some positive data.
For instance, though exports remain flat, a third of manufacturers said they are feeling “more confident about European sales prospects” and this is driving stronger expectations for exports in the coming quarter.
What’s more, sectors supplying to consumers or the construction industry have seen activity holding up well – a trend that looks set to continue into the next quarter, EEF said.
Meanwhile, the Chartered Institute of Procurement & Supply’s (CIPS) UK Manufacturing PMI has released figures that show manufacturing production rose during May.
The CIPS report says the UK manufacturing sector saw further “modest expansions” of both output and new orders in May, as “a solid domestic market continued to offset lacklustre demand from overseas”.
Commenting on the CIPS report, KPMG’s UK head of industrial manufacturing Stephen Cooper said: “The UK general economy is looking cautiously optimistic, and there is modest growth in the UK manufacturing sector.”
“However, UK productivity is not where it needs to be in order for the UK to remain competitive in the global market,” Cooper said.
“The UK needs to remain focused on focused on improving UK productivity, in order to remain competitive in the wider global market.”
