Manufacturing growth loses momentum as economic risks loom
The manufacturing sector suffered a slowdown in growth over August as smaller firms struggled to clinch new orders.
S&P Global researchers suggested growth in the manufacturing sector eased in August as the purchasing managers’ index (PMI) reading dropped from 51.9 in July to 51.7.
The reading remains above the neutral 50 mark, indicating that activity has increased. The sector’s PMI has now posted gains for 10 months in a row after much of 2025 saw output contract.
Rob Dobson, director at S&P Global, said there were “still signs for continued optimism” as business confidence rose to a six-month high.
Job creation was also at the strongest level for two years, a green shoot for a tough employment outlook across the country.
“This suggests that the slowdown [in the PMI] was mainly driven by a reduced focus on maintaining precautionary stocks as economic uncertainty eases, especially as domestic and overseas clients continue to show a willingness to spend albeit with a relatively high degree of caution,” Robson said.
The rise in employment levels was linked to more order intakes and efforts to clear backlogs, according to researchers.
However, larger manufacturers performed better as smaller producers saw output and new order intakes decline.
Manufacturing to be hit by higher energy costs
Cara Haffey, who oversees industrials at PwC UK, said businesses would be more concerned with ensuring that a recent run of positive results can be sustained.
She said keeping energy costs low and capitalising on improved demand would be “critical” for the future of the sector.
“As the government considers its priorities, the focus for many businesses will be on how quickly policy commitments translate into lower costs, greater certainty and stronger incentives for investment,” Haffey said.
Matt Swannell, chief economic adviser to the ITEM Club, warned that rising energy prices would still filter through into higher business costs.
“We expect the rest of this year to be difficult for the manufacturing sector,” Swannell said. “The conflict in the Middle East is the main wildcard in this regard, and it remains a key source of uncertainty for business.”