**UK Manufacturing Expands for Ninth Month, But Growth Slows**
British manufacturing activity has continued to expand for the ninth consecutive month in July, although the pace of growth has slowed, according to the latest data from purchasing managers. The S&P Global Purchasing Managers’ Index (PMI) for the manufacturing sector fell to 51.9 in July, down from 52.5 in June, and lower than an earlier provisional reading of 52.8. This decline marks the slowest growth rate seen in four months.
The PMI is a key indicator of the health of the manufacturing sector, with readings above 50 indicating growth and those below indicating contraction. The data, collected between July 9 and July 28, suggests that the manufacturing sector is feeling the effects of external pressures, particularly related to geopolitical tensions in the Middle East.
S&P Global noted that the month-on-month decrease in the PMI was influenced by a steep reduction in stocks of purchases, a slowdown in job growth, and a significant easing in vendor lead times. The output component of the manufacturing PMI did see an increase, rising to 52.9 from 52.6, which represents the broadest growth since September 2024, albeit still below the flash reading of 53.6.
The backdrop to this slowdown includes a breakdown of a truce between the United States and Iran in mid-July, followed by the Houthis in Yemen declaring a naval blockade on Saudi Arabia on July 20. This geopolitical instability contributed to a spike in oil prices, which exceeded $100 a barrel on July 23 and 24, potentially impacting manufacturing costs and operations.
Despite the overall slowdown, manufacturers reported the smallest rise in input costs since February, suggesting some relief in terms of expenses. However, employment levels within the sector have stagnated, indicating that while larger manufacturers are experiencing growth, smaller manufacturers are facing challenges. Reports from small manufacturers indicated a mild downturn in production volumes during July, contrasting with the performance of medium and larger firms.
In a more positive light, official data revealed a 2.3 percent annual rise in manufacturing output for May, marking the largest increase since March 2024. This growth could provide a buffer against the recent slowdown in July, indicating that the manufacturing sector has the potential for recovery.
As the UK manufacturing sector navigates these challenges, stakeholders will be closely monitoring the ongoing geopolitical developments and their implications for economic activity. The data reflects a complex landscape where growth persists, but at a diminishing rate, raising questions about the sustainability of this expansion in the coming months.