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UK factory growth slumps to weakest since April 2021

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UK factory growth grew at the slowest rate in more than a year in the three months to July. Photo: Sascha Schuermann/Getty
UK factory growth grew at the slowest rate in more than a year in the three months to July. Photo: Sascha Schuermann/Getty

Industrial output growth in UK factories grew at the slowest rate in more than a year in the three months to July as demand eased in the UK and overseas, according to a quarterly survey.

The latest figures from the Confederation of British Industry (CBI) found output volumes and new orders in the quarter both increased at the slowest pace since April last year.

A net balance of +6 of firms reported a rise in output over the last three months, down from +19 in April, but just above its long-run average of +2. A similar rate of growth is forecast in the coming three months.

Output picked up in 10 out of 17 sub-sectors, with headline growth driven largely by food, drink, tobacco, and aerospace, the CBI said.

Read more: UK factory output falls for first time since May 2020

Domestic orders growth slowed in this period, while export orders remained broadly flat.

"The manufacturing sector has been an economic bright spot in recent months, but output and orders have softened amid ongoing cost pressures, supply challenges and a generalised weakening in economic conditions both in the UK and globally," said Anna Leach, deputy chief economist at the CBI.

Trend in output growth. Chart: Confederation of British Industry
Trend in output growth. Chart: Confederation of British Industry

Companies also reported that price pressures eased, with metal, plastics and electrical goods manufacturers reporting a slowdown in rising costs.

Manufacturers expect average cost growth to slow a little further in the quarter to October.

Meanwhile, business sentiment fell for a third quarter in a row, but at a slower pace than in the previous quarter to -21% in the three months to July from -34% in the quarter to April.

However, despite the downturn investment intentions for the year ahead picked up in comparison to April.

Read more: UK inflation hits 9.4% as prices as prices rise at fastest rate for 40 years

Separate preliminary analysis from the S&P Global's Purchasing Managers' Index indicated manufacturing output declined for the first time since the first coronavirus pandemic lockdown in May 2020.

Figures showed PMI in the sector fell to 52.8 — the lowest since February 2021 — from June's 53.7.

It comes as the Bank of England warned the UK economy is likely to slow to a crawl this year and in 2023 as consumers face the highest inflation in 40 years and many businesses face a squeeze on their profits.

Watch: Why are gas prices rising?

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