UK manufacturers suffered a sharp slowdown in new export order growth in September, although overall activity in the sector continued to expand at a rapid pace, reveals a key survey.
The survey from the Chartered Institute of Purchasing and Supply, while signalling the strongest quarter for growth in manufacturing activity since the opening three months of 2011, raised further questions about the sustainability of the sector's recovery given the relatively weak growth of export orders.
CIPS's headline purchasing managers' index for UK manufacturing, which takes in output, new orders, employment, suppliers' delivery times and stocks of goods purchased, fell from 57.1 in August to 56.7 in September on a seasonally-adjusted basis.
This indicated a marginal deceleration of growth in manufacturing activity from a pace of expansion in August which had been the strongest for two-and-a-half years. But the index stayed well above the level of 50, which is calculated to separate expansion from contraction, to signal a still-significant pace of growth.
The export orders index fell from 54 in August to 52.7 in September. The September reading signalled the weakest pace of increase in export orders since May.
Martin Beck, UK economist at consultancy Capital Economics, said: "While September's CIPS manufacturing survey softened slightly, the survey still points to a sector recovering at a rapid clip."
However, he added: "With export growth weak relative to domestic demand and cost pressures persisting, some concerns remain about the balance and sustainability of the recovery."
Observing that domestic demand continued to be the major source of expansion for UK manufacturing, he described the weakening of growth in export orders as "a disappointing result given evidence that the eurozone economy is emerging from recession."
CIPS's manufacturing survey signalled the pace of increase in the UK manufacturing workforce accelerated last month to its fastest rate in 28 months.
Rob Dobson, senior economist at survey compiler and financial information company Markit, said: "We would expect to see manufacturing output expanding by at least 1% in the three months to September, and possibly by as much as 1.5%."
However, he added: "The main disappointment came in the form of a slower rise in export orders. With the exchange rate still around 20% weaker than before the financial crisis, we would expect to be seeing far stronger export gains than companies are reporting, especially with the eurozone showing signs of finally pulling out of recession."
Growth in UK manufacturers' overall new orders eased between August and September. However, the monthly rate of increase in new orders in September was not far adrift of the 19-year high recorded in August.
The UK manufacturing sector has now enjoyed growth for six consecutive months, according to CIPS's survey.
Within manufacturing, the chemicals and plastics, and textile and clothing sub-sectors achieved the sharpest rates of increase in output in September, according to CIPS.
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