Manufacturing slows 'but hiring hits two-year high'

Growth in the UK’s manufacturing industry has slipped to a five-month low as smaller firms came under more pressure – but hiring activity picked up at the fastest pace in two years, according to new figures.

The S&P Global UK manufacturing PMI survey showed a reading of 51.7 in August, down slightly from 51.9 in July.

Any reading above 50 separates growth from contraction.

August’s figure marks the 10th month in a row that overall activity has grown, but at the slowest rate since March.

Factory output has been increasing for five consecutive months, with higher levels of production driven by increased intakes of new work for firms due to demand both at home and overseas.

However, the survey revealed disparities within the industry, with smaller-scale producers seeing output and demand for new work declining, while medium and larger manufacturers benefited from expansion.

The overall slowdown was also partially linked to a reduction in stock purchasing, indicating some firms have remained cautious in response to energy price volatility sparked by the Iran war.

However, the PMI survey revealed signs of improved hiring as businesses reported feeling more optimistic about conditions improving in the year ahead.

Employment in the sector rose for the fifth month in a row and at the fastest pace for two years.

Rob Dobson, director at S&P Global Market Intelligence, said: “The rate of expansion in the UK manufacturing sector cooled in August, with output and new order growth losing traction.

“There are still signs for continued optimism, however, as manufacturers reported a positive outlook for the year ahead.

“Business confidence rose to a six-month high and job creation was the strongest for two years.

“This suggests the slowdown was mainly driven by a reduced focus on maintaining precautionary stocks as economic uncertainty eases, especially as domestic and overseas clients continue to show a willingness to spend albeit with a relatively high degree of caution.”

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