It has not been a good week so far for the economic news coming out of the UK. This week saw data releases that highlighted the impact of rising inflation is happening on global economies, with the UK being very much part of the suffering.
UK Manufacturing Growth Down to 16-Month Low
In the UK, data released on Wednesday showed that manufacturing activity in the UK expanded last month at the weakest rate since January 2021.
The final estimate of the UK Manufacturing Purchasing Managers’ Index (PMI) declined to a reading of 54.6 in May from the 55.8 reading recorded in April. The final estimate remains unchanged from the preliminary reading. Readings above indicate an economy in expansion, whilst readings below 50 indicate an economy in contraction.
The rising costs of goods and materials, coupled with labour shortages are hampering growth in the UK. Households in the UK are struggling with the steeply rising energy costs. Just last week finance minister Rishi Sunak announced 15 billion pounds of aid for households. The fresh stimulus is on top of the 22 billion pounds of broader assistance promised earlier this year.
Martin Beck, the chief economic adviser to the EY ITEM Club consultancy, commented:
“With the poor results for the consumer sub-sector suggesting that the impact of the squeeze on household finances is beginning to make its mark, the outlook for the manufacturing sector is poor.”
Some Hope for UK Manufacturing?
Despite the weak reading for May, there is some glimmer of hope for UK Manufacturing.
Although the PMI data showed that costs paid by manufacturers and selling prices again rose steeply in May, it was actually at a slightly slower pace than suggested by preliminary readings.
A separate survey of businesses from the Bank of England showed tentative signs that expectations for price increases over the coming year had stabilised at around the 6% mark. This, despite UK inflation hitting 9% in April which was a 40-year high.
