A rebound in British manufacturing slowed from a 15-year high in June as export order growth all but ran out of steam, a survey showed today, suggesting the sector's recovery may have peaked.
The Markit/Chartered Institute of Purchasing and Supply manufacturing PMI fell to 57.5 last month from 58.0 in May, bang in line with forecasts for a slight deceleration but still well above the 50.0 mark that separates contraction from growth.
"The rate at which the sector has been recouping the output lost during the recession has been nothing short of remarkable, with around one third having been recovered by the end of June," said Markit senior economist Rob Dobson.
"However, the latest survey offered signs that conditions may have passed their peak ... With the impact of austerity measures on demand both here and abroad still unknown, the latter half of the year may provide a real test for the sustainability of the recovery."
Financial markets brushed off the PMI figures and analysts said they would need more proof that Europe's debt crisis was hurting trade before calling the peak in UK manufacturing.
"It could be a one-off or it could be something more fundamental," said Philip Shaw, chief economist at Investec.
"We'll have to gauge next month's survey and other evidence to determine if this is the case."
The PMI survey showed export orders growth, which had probably been helped over the last year by a weaker pound, had nearly ground to a halt. The export orders sub-index fell to 50.7 from 56.7 in May for its lowest reading since August 2009.
Financial market troubles in Europe triggered by some countries' precarious fiscal positions have hit growth prospects on the continent and hurt the euro, making British goods less competitive with the euro zone, its biggest trading partner.
New orders growth slipped to its weakest since November 2009, the survey showed, although overall output continued to expand at a sharp rate with a strong performance across the consumer, intermediate and investment goods sectors.
Employment - a lagging indicator - rose at its fastest pace since February 1995 as companies added staff to keep up with rising production.
Reuters