UK recovery could hang in balance as manufacturing growth at 14-month low

The UK manufacturing sector is still far from its pre-recession peak.

by Elizabeth Anderson
Last Updated: 01 Sep 2014
As Britain continues its slow path to recovery, the manufacturing sector is continuing to lag behind.
Activity in UK manufacturing slowed to a 14-month low in August, according to the latest CIPS/Markit Manufacturing Purchasing Managers' Index (PMI). While the sector still recorded growth, the reading fell from 54.8 in July to 52.5, the lowest level since June last year.
Markit said the slowdown was due to a fall in orders and the fact that factories hired staff at the slowest pace since June 2013. 
Meanwhile the EEF, the UK's main manufacturing trade body, also warned of slowing growth in the sector after its members reported the first fall in export orders since early 2013.
The EEF said that with the Eurozone economy flagging significantly, political risks increasing and a stronger Sterling exchange rate, demand is now more uncertain than for some time.
As a result, the EEF has cut its forecast for factory output growth in 2014 to 3.3% from 3.5%.
'There are clearly increasing downside risks overseas which could make sustaining strong growth and particularly stronger exports more challenging going forward,' Lee Hopley, the EEF's chief economist, said.
However, broadly the EEF is positive about the UK manufacturing sector in the coming year. 'Manufacturers are still on course for a strong year of output growth in 2014...We're seeing manufacturers continue to recruit for skilled jobs and increase their plans to invest in the coming year - exactly what the UK economy still needs for balanced growth,' the EEF added.
The UK economy grew by 0.8% in the second quarter of this year, led by a continued strong performance in the services sector, one of the only areas of the economy to have outperformed its pre-recession peak. The manufacturing sector's output is still 7% below 2007 levels.

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