The UK’s manufacturing sector grew at its slowest pace in over two years last month, according to a closely-watched survey.
The S&P Global/CIPS UK Manufacturing PMI scored 52.1 in July – the lowest for 25 months and down from 52.8 in June.
Any number above 50 is seen as growth, so it means that the sector is still growing, albeit slowly.
Output and new orders were at their lowest since the onset of the COVID-19 pandemic caused much of the economy to temporarily shut down in 2020.
Rob Dobson, director at S&P Global Market Intelligence, said: “Rising market uncertainty, the cost of living crisis, war in Ukraine, ongoing supply issues and inflationary pressures are all hitting demand for goods at the same time, while lingering post-Brexit issues and the darkening global economic backdrop are hampering exports.
Advertisement“With the Bank of England implementing further interest rate hikes to combat inflation, the outlook is beset with downside risks.
“With this in mind, the continued low degree of optimism among manufacturers is of little surprise.”
More from BusinessResults ‘should make business leaders and policymakers sit up and take notice’
Duncan Brock, group director at the Chartered Institute of Procurement & Supply, said: “July’s results may have shown a marginal reduction in manufacturing output but its significance as the first fall since May 2020 should make business leaders and policymakers sit up and take notice.
“Output from the consumer goods sector went into contraction along with new orders and the signs show this trend will continue towards the autumn months.
“A reduction in the level of new orders from domestic customers clearly showed that the pressure of cost of living rises for basics such as fuel and energy made consumers think twice about non-essential purchases.
“The appetite for overseas orders were similarly affected by challenges in global economic growth, disruption in supply, transportation and customs inefficiencies at ports where order levels from the US and China fell back.
“Even a further easing of supply chain pressures was not enough as lead times continued to be a trial of endurance at historically high levels.
Cost inflation ‘slowed marginally’
“The rate of cost inflation also slowed marginally but did nothing to improve the mood of manufacturers with optimism unchanged from last month’s low levels.”
Martin Beck, chief economic adviser to the EY ITEM Club, described the slowing in cost inflation as “the one bright spot” in the survey.
He added: “The (Bank of England’s Monetary Policy Committee) should be heartened by the cooling in inflationary pressures.
Read more:Nine tips to reduce how much petrol or diesel you useRevealed: Number of meals wasted by UK households each week
“But it’s unlikely to have any impact on their thinking for this week’s meeting, where a rate rise of at least 25 basis points is certain and an increase of 50 basis points is a live possibility.”
Mr Beck said output price inflation is likely to continue to cool this year, with the bank rate reaching 2% by the end of 2022 rather than the higher level currently implied by market pricing.