Manufacturing subdued as Brexit and trade fears linger

Output in Britain's manufacturing sector edged up in May, but the industry remains "subdued" as Brexit uncertainty and trade war fears continue to weigh.

The Markit/CIPS UK manufacturing purchasing managers' index (PMI) showed a reading of 54.4 last month, higher than the 54.3 for June.

Economists were expecting a figure of 54. A reading above 50 indicates growth.

The report said the sector remained "subdued" as growth of new orders improved only mildly, with the upward figure put down to inventory build-ups and backlog clearing.

Rob Dobson, director at IHS Markit, which compiles the survey, said: "The UK manufacturing sector ended the second quarter on a subdued footing.

"The trend in demand will need to stage a much firmer rebound if a further slowdown in output growth is to be avoided.

"How likely such a revival is remains in some doubt, with the June survey also seeing business optimism drop to a seven-month low amid rising concerns about possible trade tariffs, the exchange rate and Brexit uncertainty."

Input cost inflation accelerated to a four-month high in June, with a shortage of certain raw materials behind the hike.

Sterling was down 0.3% against the dollar and up slightly versus the euro at 1.31 and 1.13 respectively following the reading.

"With industry potentially stuck in the doldrums, the UK economy will need to look to other sectors if GDP growth is to match expectations in the latter half of the year," Mr Dobson added.

Data also showed the rate of new work edged up to a three-month high in June, but it remained among the weakest registered over the past year-and-a-half.

Rates of growth in new work were "broadly steady" in both domestic and overseas markets.

Howard Archer, chief economic adviser at the EY ITEM Club, said: "The Markit/CIPS manufacturing purchasing survey points to the manufacturing sector struggling to regain momentum in June after a much-weakened performance so far in 2018 compared to the robust performance seen in the second half of 2018.

"This is somewhat disappointing given that the June CBI industrial trends survey had been much improved."