Concerns have been raised about confidence among UK firms as a report highlighted the biggest slowdown in new manufacturing orders for almost a year.
The closely watched Markit/CIPS UK Manufacturing purchasing managers’ index (PMI) for June showed output at a three-month low as the country went to the polls for the snap General Election.
The monthly survey showed a slump in new domestic orders amid “increased business uncertainty” – with export growth remaining lacklustre despite the benefit of the weaker pound since the Brexit vote.
Economists had hoped exporters would help ride to the rescue this year as rising inflation and weaker wage growth combine to take a toll on consumer spending.
But there is increasing evidence that higher import costs in the supply chain have taken a toll while the election may have also been a factor in dampening demand.
A report for the CBI covering May had reported ‘Made in Britain’ order books hitting levels not seen for 30 years.
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Rob Dobson, senior economist at IHS Markit, said: “The main factor driving the broad slowdown in June was a steepeasing in the rate of increase in new order intakes.
“New business rose at the weakest pace for nearly a year and growth was down sharply from April’s near three-year high.
“This slowdown was largely centred on the domestic market, where increased business uncertainty appears to have led to some delays in placing new contracts.
“Export orders remained disappointingly lacklustre despite the ongoing competitiveness boost of the weak sterling exchange rate.”
The pound fell back below $1.30 when the PMI was released – down more than half a cent on the day – having recovered some value last week on evidence Bank of England governor Mark Carney was warming to the idea of an interest rate rise to combat inflation.
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Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “Weakening demand and the fall in the oil price meant that output prices rose at the slowest rate since September.
“At the margin, then, today’s manufacturing report weakens the case for raising interest rates soon, although Wednesday’s services survey will have a much bigger bearing on the (Bank of England’s) Monetary Policy Committeedebate.”
Naeem Aslam, chief market analyst at Think Markets UK, said: “Traders have pushed the sterling lower as the economic number was terrible.
He added: “The focus will be on the services PMI data …and if we do see a similar picture, it could bring some devastating outcome for sterling.”