British factory activity expanded at the weakest pace in three months in September, suggesting minimal support to the economy from manufacturing.
The seasonally adjusted Purchasing Managers’ Index fell slightly to 51.5 in September from 51.6 in August, which was revised up from 51.5, survey figures from the Chartered Institute of Procurement & Supply and Markit Economics showed Thursday.
Economists had forecast the index to fall to 51.3. The reading has been running above 50 for thirty straight months.
Nonetheless, the pace of growth seen in the second and third quarters of this year have been weaker than seen earlier in the current growth sequence.
The industrial side of the economy is playing no role in the economic recovery at the moment, Ruth Miller at Capital Economics, said. And so it will be left to the service sector to do the heavy lifting again this quarter, the economist said.
“The ongoing malaise of the manufacturing sector will add to broader growth worries and supports dovish calls for a first rise in interest rates to be held off until industry returns to a firmer footing,” Rob Dobson, a senior economist at Markit, said.
A survey from the British Chambers of Commerce showed on Thursday that manufacturing confidence weakened with export sales hitting a six-year low and services growth slowed slightly. The survey suggested moderate economic expansion next year.
Elsewhere, the monthly growth indicator from the Confederation of British Industry today showed a slight decline in the rate of economic expansion in three months to September. Rain Newton-Smith, CBI Director of Economics, said the strength of the pound is hitting exports to the euro area and emerging markets lost some of their sparkle.
Manufacturing output expanded at the fastest pace in six months in September, but was still well off the peaks seen during the opening quarter, Markit said. At the same time, growth in new orders slipped to the joint-weakest pace in a year.
Manufacturers reduced their staffing levels for the first time since April 2013, though only marginally.
On the price front, input prices declined further in September to the steepest level since February 2009, due to lower raw materials, especially oil and oil-related costs.
The rate of cost deflation accelerated to its steepest since February 1999 and remained among the fastest registered in the near 24-year survey history.
Selling prices dropped for the first time in three months in September, reflecting competitive pressure and some pass-through of lower input costs to clients. However, the pace of decrease in output charges was only moderate.
The BCC survey showed that manufacturers intentions to raise prices fell sharply in the third quarter.
A report from the Office for National Statistics today showed that labor productivity increased 0.9 percent in the second quarter from a quarter ago to the highest level ever recorded for this series.
IHS Global Insight Economist Howard Archer said productivity is still limited to what it would have been had the trends prior to the 2008/9 recession continued and it needs to see sustained appreciable improvement going forward if the UK is to enjoy healthy growth for a prolonged period.
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