Suprising Results From June's S&P Global Manufacturing PMI

There are some surprising results from June’s PMI, a study of prevailing monthly economic trends in the manufacturing sector.

The S&P Global UK manufacturing Purchasing Managers Index registered 50.9 last month, a decrease from May’s 22-month high of 51.2 and earlier estimates. 

This is despite the expansion in output and new orders for the second consecutive month, with rates close to the highs of May.

The PMI also indicated a subtle rise in cost inflationary pressures, with input prices increasing the quickest they have since January 2023. 

Despite these changes, which are consistent with improved operating conditions, the UK’s Manufacturing PMI has on the whole remained flat.

A fact that Richard Powell, partner at MHA says is understandable considering the big political changes on the horizon.

“Manufacturing PMI has remained flat but this was to be anticipated as we were in the run-up to an election.” says Richard. 

"In addition, interest rates remained stubbornly high, and manufacturers are sitting on their hands until they are sure that the cuts will happen.

However, even once rates start to fall, there will be a lag before investment starts to flow.”

The expansion indicated by June’s Manufacturing PMI is positive and broad across sub-sectors, with growth registering across investment, intermediate and consumer goods. But when you break down the data according to company size, you see more mixed results. 

Output growth was on the whole confined to large-scale producers, with contractors signalled for SME manufacturers.

This trend continues with demand, with new orders falling at smaller companies and rising at larger organisations.

“While these are immediate challenges, there are some fundamental issues that the incoming government, of whichever colour, will have to address to support the sector,” adds Richard. 

"Labour shortages are still commonplace and are not going to be fixed overnight. Manufacturers are also struggling with exporting to the EU, the UK’s biggest trading partner, eight years post-Brexit.” 

These labour shortages are well documented in the PMI, which indicates that inflows of new work from overseas declined for the twenty-ninth month in a row.

There was a reported decline in intake from clients in China, Italy, Sweden, the Middle East, Germany, France, Poland and North America.

Part of this latest decline has been linked to the rising freight costs and shipping delays caused by the Red Sea crisis.

This supply chain instability is a factor in the rise in purchase pricing, as indicated by the PMI. June saw the average purchase prices rise for the sixth successive month, at the quickest pace since January 2023.

A wide range of inputs, including food, metals, packaging, paper, timber and plastics are up in price.

These increased costs have created higher selling prices, rising for the eighth successive month. 

Richard believes what is critical to addressing these challenges, particularly the pressures experienced by UK manufacturing SMEs is investment and the creation of a defined roadmap.

“These issues can only be resolved through significant investment in the industry,” he says.

“Over the last few decades, there has been a lack of a well-defined plan to support manufacturers, which has led to closures. Although it sounds as though the manufacturing industry is finally being listened to as the recent party manifestos refer to the importance of having an industrial strategy.”

The consensus that the UK government needs to greater support the manufacturing sector is growing, with some arguing the nation needs a dedicated Minister of Manufacturing.

What's for certain is that the next government cannot ignore its responsibility to ensure the UK’s economic future, a huge part of which is investing in and supporting local manufacturing.

“Manufacturers have been calling out for this for many years; hopefully the next government will deliver,” concludes Richard.

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