UK manufacturing growth slowed in June as shipping delays and higher freight costs affected exports. Nevertheless, companies remain optimistic about a market recovery, although demand from North America, China, the Middle East and parts of Europe has declined.
For the second consecutive month, factories increased activity, but at a slower pace than in May. According to the S&P Global/CIPS UK purchasing managers’ index (PMI), industry output was 50.9 in June, slightly lower than May’s 22-month high of 51.2. A reading above 50 indicates expansion.
The PMI survey showed higher production volumes due to a rise in new domestic orders and continued efforts to clear work backlogs. However, new export orders fell for the 29th month in a row, with declines noted from the United States, China and mainland Europe.
Rob Dobson, director of S&P Global Market Intelligence, highlighted the positive performance of the domestic market: “The UK manufacturing sector is experiencing its strongest growth in more than two years. June production and new order growth were robust and reflected May’s highs. The domestic market remains a rich source of new business, but weak export performance is worrying, with manufacturers struggling to win new business in key markets.”
S&P attributed some of the export decline to shipping delays and rising freight costs, often caused by attacks on container ships in the Red Sea by Houthi rebels. Companies also reported price increases in raw materials such as energy, food, metals, packaging, paper, plastic and wood.
Peter Arnold, chief economist at EY UK, commented: “June saw strong output growth again, with only a slight decline from the peak in May. New orders are growing steadily, but global shipping bottlenecks have pushed up transportation costs, leading to the highest input price inflation since January 2023. While shipping disruptions have raised inflation concerns in 2024, core inflation has remained lower than expected, prompting the Bank of England to cut interest rates soon.”
Rob Wood, chief UK economist at Pantheon Macroeconomics, noted the resilience of the sector: “Despite downward revisions to output, the figures show the sector is making a solid recovery.”