Belfast Telegraph

Manufacturing sector hits nine-month low

By Russell Lynch

Manufacturing in the UK dipped to a nine-month low in August.

The Chartered Institute of Purchasing and Supply's (CIPS) activity index, where a reading over 50 indicates growth, slipped to 54.3 last month - the lowest since last November.

The closely-watched measure of new orders as a proportion of stockpiles also fell to a 17-month low - suggesting further slowdown in production ahead.

Consumer goods manufacturers bore the brunt of the slide, offsetting higher demand for capital goods, such as plant and machinery.

Employment rose for the fifth month in a row, but firms are still facing cost pressures due to rising raw materials prices.

According to official figures, manufacturing output grew by 1.6% in the second quarter of 2010 as the economy advanced at the fastest rate since 2001.

But Bryan Gray, head of Northern Ireland Manufacturing, said the sector had remained flat in Northern Ireland due to its dependence on the still quiet Republic of Ireland market.

Gray said: "We haven't experienced the growth which the UK did, so therefore we are not having the dip which is affecting them.

"The only sector within manufacturing to experience growth in Northern Ireland has been food. The construction products sector is very important to Northern Ireland and we haven't seen it improve at all."

CIPS chief executive David Noble said nerves over the potential impact of deficit-busting measures was hampering sales growth in the UK.

"The looming public sector spending cuts are keeping UK manufacturers on tenterhooks and slowing the pace of recovery," he warned.

The slowdown in activity was bigger than feared by the market, falling from a reading of 56.9 in July. Firms saw a "modest" rise in export orders, but the growth was well below the record highs seen earlier this year and support from overseas is "fizzling out", according to Markit senior economist Rob Dobson.

But Capital Economics' chief European economist Jonathan Loynes said today's CIPS survey showed the recovery among manufacturers was "losing momentum".

"There is further support here for the view that the rapid growth in the economy seen in the second quarter - to which industry made a strong contribution - will not be sustained in the coming quarters," he added.