UK factory output falls for the first time since May 2020

Output at UK factories grew at its slowest pace in 17 months in July. Photo: Phil Noble/Reuters

UK manufacturing output fell for the first time since the first coronavirus pandemic containment in May 2020.

The preliminary version of S&P Global’s Purchasing Managers’ Index (PMI), covering services and manufacturing companies, fell to 52.8 – the lowest since February 2021 – from 53.7 in June.

It came as the reading for the broader economy slipped to 52.8 – from 53.7 in June – a 17-month low.

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Factory output contracted for the first time since May 2020, but travel and leisure companies saw stronger new orders, the survey showed.

The UK business survey showed slowing production growth due to “weaker demand”.

However, the latest data also indicated that cost inflation “decreased significantly” from the previous month and was at a 10-month low.

The numbers are good news for the Bank of England as it could reduce pressure for a bigger than usual interest rate hike next month.

UK interest rates

UK interest rates. Chart: Yahoo

Chris Williamson, chief economist at S&P Global Market Intelligence, said: “UK economic growth slowed in July, recording the slowest expansion since the lockdowns in early 2021.

“While not yet in decline, with pent-up demand for consumption-oriented vehicles and services such as travel and tourism helping to support growth in July, the PMI is now at a level consistent with GDP growth of only 0.2%.

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“Forward-looking indicators suggest the worst is yet to come.

“Manufacturing backlogs are now deteriorating for the first time in a year and a half, as new work inflows are insufficient to keep the workforce busy, which is usually a precursor to production and layoffs. jobs in the coming months.”

Prices charged by businesses rose at the slowest pace since January as customer demand faltered.

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