British manufacturing activity growth slowed in June as shipping disruptions in the Red Sea led to lower demand from overseas customers. The UK Manufacturing Purchasing Managers' Index (PMI) fell to 50.9 in June from a 22-month high of 51.2 in May. The final number for June was also below the initial estimate of 51.4.
Despite the fall, the overall picture remains positive, with production and new orders showing an increase. However, the sector is facing challenges as employment numbers have declined, delivery times have extended and input costs for manufacturers have risen sharply since January 2023.
The maritime problems are largely attributed to the ongoing crisis in the Red Sea, where attacks by Yemen's Houthi militias have disrupted international shipping lanes since November. These developments led many ships to divert around the southern tip of Africa, avoiding the traditional route from the Red Sea to the Suez Canal.
Export orders were particularly affected, falling for the 29th consecutive month. This is a result of the aforementioned shipping delays, compounded by high shipping costs.
Against a broader economic backdrop, official data released on Friday showed that the UK manufacturing sector, which accounts for 10% of the economy, grew by 1.1% in the first quarter of 2024. This marks the second strongest quarterly growth since the start of 2021. However, goods export volumes fell by 3.5% in the same quarter, largely due to fluctuations in the non-cash gold trade distorting British trade figures, according to the Office for National Statistics.
Reuters contributed to this article.
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