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UK manufacturing sector activity fell to a two-year low in June as inflationary pressures remained elevated, according to S&P Global on Friday.
The S&P Global-CIPS UK manufacturing purchasing managers' index fell to 52.8 in June from 54.6 in May and was revised down from an initial estimate of 53.4. It was the lowest reading in two years.
S&P said the slowdown in the UK manufacturing sector continued at the end of the second quarter, as June saw output growth grind to a near-standstill pace and new orders contract for the first time in 17 months.
In addition, S&P said inflationary pressures remained elevated due to raw material shortages, stretched supply chains, higher prices for commodities, electronics, energy, oil, paper, plastics and timber. Higher costs were passed on, in part, to clients in the form of increased selling prices, it noted.
Rob Dobson, director at S&P Global Market Intelligence, said: ‘UK manufacturing output growth ground to a near standstill in June, as intakes of new work contracted for the first time since January 2021. Domestic market conditions became increasingly difficult and foreign demand fell sharply again, stifled by Brexit, transport disruption, the war in Ukraine and a global economic slowdown.
‘Business confidence took a hit as a result, dipping to its gloomiest since mid-2020. Jobs growth also slowed sharply amid the increasingly uncertain outlook and recent surge in energy costs.
‘There were some welcome signs that supply-chain constraints and cost inflationary pressures may have passed their peaks. However, with these constraints still elevated overall and demand headwinds rising, it is likely that UK manufacturing will see the economic backdrop darken further in the second half of the year.’
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